Tuesday, April 17, 2012

John Embry on China & Gold

First, if you haven't read my post earlier today on the Gold Wars, please read it first then come back to read this post as it directly relates to this post.

John Embry  comments today on China and Gold:

With gold near the $1,650 level and silver firmly above $31, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management.  Embry told KWN the financial system is built on an unsustainable mountain of debt, and over time this will create a more significant shift from paper markets to hard assets.  He also stated that what is taking place in China right now is wildly bullish for gold.  But first, here is what Embry had to say about what is happening with the gold and silver markets:  The gold and silver situation is under control of the paper manipulators at this time.  I think they have an agenda to keep the gold and silver space as quiet as possible, in order to keep people away from it.

“They have a vested interest in making sure people are buying stocks and bonds.  In the fullness of time this will be overcome, but in the meantime we have to put up with this.  To me, gold is the antithesis of the financial system as we know it.  It’s real money.

The problem with the financial system is that it’s built on an unsustainable mountain of debt.  The idea that we are going to be able to cure the current problem by creating more debt isn’t going to work.  We can’t support the existing debt....

“As this sinks in with a lot of people, and it will as time goes on, gold is going to be seen as a major alternative, if not the major alternative.  It won’t take much of that money that’s currently tied up in paper, moving into the gold space, to have an outsized impact on the price.

The Chinese, over the weekend, stated their intention they wanted to make the yuan a much more internationally traded currency.  Up to now it’s been so restricted that you couldn’t really deal in it.  If this is their intent, and I believe it is, this is a huge step.

This is spectacularly bullish for gold because I think the Chinese will ultimately want to back their money with gold.  The Chinese are huge players in the gold market.  That’s their agenda, to be seen as a major play in the international currency market.

What the US dollar doesn’t need these days is serious competition in terms of being the reserve currency.  If the US dollar starts to move off center stage as time goes on, this will be wildly bullish for gold.  One of the things that would destabilize the whole financial system is if people figured out how vulnerable the US dollar is.”

John seems to believe, as I do, that China's long term goal is for the Yuan/Reminmbi to become the new world reserve currency and will do this by backing their currency with gold. I previously noted this back in January. Remember that being the world's reserve currency comes with huge privileges, one of which is lower than normal interest rates on the government's debt. If the US loses this status, what do you think the interest rate will be on our $15.5 Trillion (and soon to be $20 Trillion) debt?

No comments:

Post a Comment