Friday, November 30, 2012

Billionaire Eric Sprott: Gold to rise 500%

From KWN:

“There’s been some discussion on the web of various dealers having difficulty fulfilling orders.  I’ve confirmed through my channels that there has been a very big increase in demand in the last six to eight weeks.”

“We can see that by looking at the US Mint statistics.  For example, in this month, which is not complete yet, gold sales have more than tripled from the same time last year.  Silver sales are up 120% so far.  You can kind of sense that the demand for both gold and silver is back to very significant levels.

That’s not just in North America by the way....
“We read articles of how the Indian demand has picked up here recently.  They think they are going to have a big 4th quarter demand for gold.

There is (also) lots of discussion about repatriating gold, and that goes to Germany, Austria, now the Netherlands.  I think the more instructive example was when they (Austrian politicians) asked the Austrian Finance Minister, ‘What percent of our gold is held in Austria?’  I think the number was something like 13% or 17%, and the rest was in New York and London.

At the same time he (Austria’s Finance Minister) mentioned they had been earning income on leasing the gold.  These central banks have deposited their gold with the Fed or the Bank of England, and in turn it has been leased out.  Of course when gold is leased out it ultimately gets sold in its physical form to someone who is not likely to return it. 

For example, if our ETF buys gold, it’s not going back.  If the Chinese buy gold, it’s not coming back into the system.  If the Indians buy gold, it’s not coming back.  So the central bank has, in essence, an IOU from a bullion bank on their balance sheet, but if they exercised that IOU, there is no way they would get that gold back. 

The central banks have continued to supply gold into the market by leasing it out into the gold market.  And when they ask to get it back, whether it’s the Germans or the Dutch or the Austrians, they are going to find out they are not going to get the gold back and they don’t really own it.  They have a claim on it, but they won’t be able to exercise their claim.

That’s why I speculate they (Western central banks) may have very little gold left.  There is no doubt that central planners are trying to avoid a financial collapse here.  Of course, one of the things is to try to keep the price of gold and silver under control.  That’s why, as you know, they will bend anything to make the system look normal, including printing money which I believe is totally farcical.  That, I’m sure, would include selling of gold which all the data tells me they must be selling.

I’ve always thought that someday they were going to look in the cupboard (vaults) and say, ‘Look, we’re not going to win this thing anymore, and it will just end.  I don’t know when that day happens, but every day that I look at the gold market, the situation just gets tighter and tighter (in the physical market).

I think there is lots of evidence of this tsunami of interest coming back into the gold market.  Eric, you would find it interesting that most of these (financial) experts say that you should have 5% or 10% of your money in gold.  Well, today gold represents 1% of all of the financial assets in the world.

How can you go from 1% to 5% when you only have a 1.5% increase in supply each year?  It’s absolutely impossible.  I find it almost hilarious to think that a mass (of investors) would try to get to that level because it would just be impossible.  The only way you can go from the current 1% to 5%, is essentially to have the price go up by 500% and I think that’s probably more likely what is going to happen.”

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