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BookmarkOn the heels of J.P. Morgan announcing its desire to exit the physical commodity business, they also clearly indicated they were staying in the gold and silver business. From J.P. Morgan’s release: “J.P. Morgan has also reaffirmed that it will remain fully committed to its traditional banking activities in the commodity markets, including financial derivatives and the vaulting and trading of precious metals.”
With that news aside, today billionaire Eric Sprott spoke with King World News about the unprecedented events taking place in the gold and silver markets. This is the second in a series of interviews with Sprott that will be released today. Below is what Sprott, who is Chairman of Sprott Asset Management, had to say in part II of this remarkable series of interviews.
Sprott: “The price (of gold) being where it is is just a joke. It’s been totally manipulated, and when people realize what the real situation is in physical gold I think we will see a very quick run-up (in price).
There are lots of reasons for people all over the world to own gold. They can see what their governments and central banks are doing with the printing of money…
So I think we will certainly see new highs. I have this vision that gold goes to $2,000 (initially), that gold stocks could triple from here, and I fully believe they will. So there are huge opportunities for people in both the equities and metals markets.
The price of gold has been suppressed. It’s been suppressed to make people think that fiat currencies are sound. They aren’t sound. We’ve never had an audit of the Fed gold or the Treasury gold since 1954. The Germans can’t get their gold. It’s obvious that there is an extreme shortage here.
Of course the Chinese have stepped up their buying. The Indians had stepped up their buying massively until the cumulative effect of all of these measures seems to have officially kept imports down. We don’t know whether unofficially they are down because their is a lot of smuggling (of gold) into India.
So we won’t see the data points because it’s all gone underground. But I don’t think you are going to dissuade the Indians from buying gold. They will find a way to buy it. So there is an extreme shortage and the smartest thing anyone can do is just hold on to their metals because I think we have a great ride in front of us.”
Eric King: “With regards to the physical shortage in gold, the normal things that remedy that — lease rate activity and some of the other tactics that have worked in the past, they don’t seem to be working this time. I find that interesting.”
Sprott: “It’s not going to work. Backwardation is telling you that people are unwilling to sell their gold at a price today where they can buy it in the futures market at a lower price, and get the use of the money for three months, and they are not prepared to do it. That’s what backwardation tells you — that there is a shortage of physical gold today and that people aren’t willing to speculate that they are going to get delivery in the future. So all of the signs point to extreme tightness in the market.
You mentioned silver (earlier), which I think will outperform gold. Even when I look at this month’s sales of coins by the U.S. Mint, they have sold 100 times more silver coins than gold coins. Yet we only produce 11 times more silver than gold, and most silver is not available for investment, yet we see this huge investment demand for silver.
So I continue to believe that silver is going to be the investment of this decade. I see wonderful statistics out of India on silver. You can just imagine that if they can’t buy gold bars and coins, maybe they will start buying silver. Well, that would just be a monstrous amount of silver that the Indians would need and there is no way that the world can supply it.”
