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Eric Sprott On A "Gold Tsunami"

Tyler Durden's picture




 

Gold Tsunami

By:  Eric Sprott & David Franklin of Sprott Asset Management

Ignoring real estate, most people invest their hard earned money in paper things. Stocks, bonds, annuities, insurance - it’s all paper, and it sits nicely in our bank accounts and shows up on our computer screens. Halfway across the world, investors in China and India have never trusted paper investments as a store of value - and they’re converting their hard earned paper money into gold and silver bullion. Not that this is anything new. It isn’t. But the scale and speed with which they are accumulating precious metals IS new, and it’s driving the fundamentals that we believe will lead to higher prices in 2011.

Demand for the metals is literally exploding in Asia, and it’s creating shortages of physical bullion around the world. The statistics are extraordinary. China, the world’s largest gold producer, now requires so much of the precious metal (in addition to what it already mines) that it imported over 209 metric tons (6.7 million oz) of gold during the first ten months of 2010. This represents a fivefold increase from the estimated 45 metric tons it imported in all of 2009.1

According to the World Gold Council, Chinese retail demand for gold increased by 70% from October 2009 to September 2010, representing a total of 153.2 tonnes of gold imports. Yet, over the same period, the demand for gold jewelry rose by only 8%.2 There is a clear trend developing for Chinese investment in gold as a monetary asset, and China is buying so much gold for investment purposes that it now threatens to supercede India as the world’s largest gold consumer. Chinese demand in 2010 is expected to reach approximately 600 tonnes, just behind India’s 800 tonnes.3 To put that in perspective, 2010 world mine production is forecasted to be 2,652 tonnes, which means China and India could collectively lock-up over half of global annual production.

Even more surprising is the increase in Chinese demand for silver. Recent statistics show that silver imports have increased fourfold from 2009 to 2010. In 2005, the Chinese exported just over 100 million oz. of silver.4 In 2010, they imported just over 120 million oz. This represents a swing of 200 million+ oz. in a market that supplied a total of 889 million oz. in 2009 - a truly tectonic shift in demand!5

We are seeing widespread evidence of major shortages of physical gold and silver bullion across the globe. The Perth Mint recently stated that: "Demand for our coins and medallions is strong, but the biggest demand is coming from banks and traders looking for kilo bars."6 Three weeks ahead of Chinese New Year, Asian dealers were reporting premiums in mainland Chinese gold exchanges of $23 per ounce.7 Even Jim Cramer has acknowledged the current shortage in minted US gold coins, stating on his CNBC television show in December that: "As someone who tried to buy U.S. coins in December, there was a real scarcity. My dealer reportedly just couldn’t get any coins - tried to sell me Australian bullion. Said there was a shortage. Very telling."8

While Chinese New Year celebrations typically drive gold demand in the month of January, there are stronger forces at work here. The Chinese are fighting the resurgence of inflation. To protect their wealth, the populace is turning to gold and silver as a store of value. Precious metals ownership is a relatively new phenomenon in China, where Chinese citizens have only been able to purchase gold freely within the last ten years. Ownership restrictions were lifted in 2001 when the Chinese central bank abolished its long-term government monopoly over gold. The Shanghai Gold Exchange was then created in October 2002 to replace the People’s Bank of China’s gold purchase and allocation system, thus ushering in a new era of gold investment in China.9 Investor interest in precious metals has increased dramatically since then, and new investment products are making gold more convenient to purchase and easier to own.

One such program recently caught our eye and speaks to the new era of gold investment within China. On April 1, 2010, the World Gold Council and Industrial and Commercial Bank of China (ICBC) issued a press release announcing a strategic partnership.10 Though seemingly innocuous, this press release introduced a completely new investment product for Chinese investors: The ICBC Gold Accumulation Plan ("ICBC GAP"). ICBC GAP allows investors in mainland China to accumulate gold through a daily dollar averaging program. The minimum investment required is either 200 RMB per month or 1 gram of gold per day (equivalent to approximately US$42).11 Customers may renew the contracts at maturity, convert them into cash or exchange them for physical gold. The accounts are perfect for investors who want to accumulate gold over the long-term. While gold accumulation plans exist in Japan, Switzerland and other countries, this is a first for mainland China. Kudos to the World Gold Council for their efforts in setting up and promoting the program.

The most significant fact related to the ICBC GAP program is how fast it has captured the investing public in China. One million accounts have already been opened since the program launched on April 1st, resulting in the purchase of over 10 tonnes of gold thus far. According to press releases, the ICBC GAP plan was taken up by a mere 20% of total depositors at ICBC, and was only launched in select Chinese cities during the test phase. The ICBC bank just happens to be the largest consumer bank on earth with approximately 212 million separate accounts. If we apply some realistic assumptions and arithmetic, it’s easy to imagine how large this program could potentially become.

Suppose, for example, the ICBC GAP plan were expanded to cover all ICBC depositors, and also expanded to the next four largest Chinese banks. Let’s further assume that the gold purchases within the plan enjoyed the same rate of growth as the test phase mentioned above. If we add all these numbers together, it results in gold purchases of an extra 300 tonnes of gold per year, or over 10% of the estimated 2010 global gold production.

The implications of this burgeoning Chinese demand for the gold market are immense. If these predictions prove accurate, the ICBC GAP plan could become the single largest buyer of physical gold on the planet. Considering that the program has only been launched in one Chinese bank thus far, imagine if it were extended to other institutions or other large gold consuming countries such as India, Russia or Turkey?

Speaking from Japan, the head of the World Gold Council recently commented on the early success of the ICBC GAP plan in China: "Here in Japan, it has taken over 10 years for the gold-savings account industry as a whole to reach 700,000 accounts. It is impressive that only one Chinese bank can exceed that level so easily, within one year, without PR or active marketing in-branch." The World Gold Council does their own arithmetic on how much gold the Chinese can consume: "In 2009, per capita gold consumption in China was 0.33 grams, up from 0.17 grams in 2002." Based on this data total Chinese gold consumption could range from 1,000 tonnes per year or more.12 This implies that the Chinese could consume almost half of the gold produced globally on an annual basis.

The ICBC Gold Accumulation Plan and other alternate methods of investing in gold have the potential to overwhelm current supply in the gold market. If a similar program were launched for silver accumulation, in the same dollar terms at current prices, it would consume over half of the silver produced each year! In Asia, only physical gold and silver will do… and unlike the supply of treasury bills, bonds or paper currencies, the supply of physical gold and silver is undoubtedly finite.

We believe Asian demand for physical gold and silver is akin to a tsunami. While precious metals prices have corrected on the paper exchanges, the inflation resurgence in Asia is quietly driving new, unforeseen levels of physical demand for the metals. While the world continues to float on a sea of paper, this massive wave of physical demand silently threatens to crash into the physical gold and silver market, potentially wiping out tangible supply.

 

 


1 Hook, Leslie. (December 2, 2010) China’s gold imports surge fivefold. Financial Times. Retrieved on January 31, 2011 from:
http://www.gold.org/download/rs_archive/WOR5797_Gold_Invest_Report_China_Web.pdf
2 D’Altorio (December 30, 2010) China’s Gold Rush. Investment U. Retrieved on January 31, 2011 from:
http://www.investmentu.com/2010/December/chinas-gold-rush.html
3 Pearson, Madelene. (January 12, 2011) Gold Imports by India Likely Reached Record, WGC Says. Bloomberg Businessweek. Retrieved on January 31, 2011 from:
http://www.businessweek.com/news/2011-01-12/gold-imports-by-india-likely-reached-record-wgc-says.html
4 (December 2, 2010) Gold Imports by China Soar Almost Fivefold as Inflation Spurs Investment. Bloomberg. Retrieved on January 31, 2011 from:
http://www.bloomberg.com/news/2010-12-02/china-gold-imports-jump-almost-fivefold-as-inflation-outlook-spurs-demand.html
5 The Silver Institute. Demand and Supply in 2009. Retrieved on January 31, 2011 from:
http://www.silverinstitute.org/supply_demand.php
6 Campbell, James (January 12, 2011) Unrelenting demand for gold below $1400 - Perth Mint. Retrieved on January 30, 2011 from: 
http://www.mineweb.com/mineweb/view/mineweb/en/page103855?oid=118307&sn=Detail&pid=102055
7 Ash, Adrian (January 12, 2011) Shanghai Gold Premium Hits $23/Oz, China Opens 1 Million Gold-Savings Accounts. London Gold Market Report. Retrieved on January 31, 2011 from: http://www.resourceintelligence.net/shanghai-gold-premium-hits-23oz-china-opens-1-million-gold-savings-accounts/14715
8 CNBC: Buy this pause in gold’s bull run, "Mad Money" host Jim Cramer advises. Retrieved on January 31, 2011 from:
http://www.blanchardonline.com/investing-news-blog/econ.php?article=1697&title=CNBC%3A_Buy_this_pause_in_gold%27s_bull_run%2C_%22Mad_Money%22_host_Jim_Cramer_advises
9 China Gold Report: Gold in the Year of the Tiger. The World Gold Council (March 29, 2010). Retrieved on January 31, 2011 from: http://www.gold.org/download/rs_archive/WOR5797_Gold_Invest_Report_China_Web.pdf
10 World Gold Council (April 1, 2010) World Gold Council and ICBC Enter into Strategic Partnership to Promote China’s Gold Market. Retrieved on January 31, 2011 from: http://www.gold.org/download/pr_archive/pdf/ICBC_MOU_010410_pr.pdf
11 World Gold Council. (December 16, 2010) World Gold Council and ICBC launch first gold accumulation plan in China. Retrieved on January 31, 2011 from: http://www.gold.org/download/pr_archive/pdf/2010-12-16_ICBC_GAP_release.pdf
12 Ash, Adrian (January 31, 2011) Gold Shorts Beware China’s Million-Strong Gold Savers. Forbes. Retrieved on January 2011 from: http://blogs.forbes.com/greatspeculations/2011/01/13/gold-shorts-beware-chinas-million-strong-gold-savers/

 

 

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Mon, 02/07/2011 - 20:11 | 941892 DosZap
DosZap's picture

Get ready asap to take your profits of the table Dr.C, and the PM's are going to do a pullback.

Gold $1225.00+/-, Slvr, $23.00+/-

Hope you have some dry pweder left to use.

Mon, 02/07/2011 - 15:22 | 941083 william the bastard
william the bastard's picture
161,000 tons of gold have been mined in human history according to National Geographic's Jan 2009 issue. 50% of that amount has been mined in the past 50 years . According to the article Chinese demand totaled 153 tons or about 0.095 % of supply. Transactions at the margin drive all free market pricing mechanisms but is this really a "tsunami"?
It's not like Sprott doesn't have a dog in the hunt.
Mon, 02/07/2011 - 15:55 | 941189 DollarMenu
DollarMenu's picture

From the article-

"Chinese demand in 2010 is expected to reach approximately 600 tonnes, just behind India’s 800 tonnes.3 To put that in perspective, 2010 world mine production is forecasted to be 2,652 tonnes, which means China and India could collectively lock-up over half of global annual production."

This indicates Chinese purchase of over 22% of supply.

Tsunami or not, it is a pretty large purchase at the margin.

Almost all of the previously mined stuff is locked down.

Gold owners with 'dogs in the hunt' are not sellers.

These are "players" much more serious than Mr. Sprott.


Mon, 02/07/2011 - 16:10 | 941239 william the bastard
william the bastard's picture

Are those prospective buyers under contract?

Mon, 02/07/2011 - 18:00 | 941560 JonNadler
JonNadler's picture

so william, you agree with me: gold 200 a pound?

Mon, 02/07/2011 - 18:31 | 941634 DoChenRollingBearing
DoChenRollingBearing's picture

Ah, JonNadler!

Hired another one, eh?  If he fails like Bravo did, what are you going to do?  Feed him to Blythe?

Mon, 02/07/2011 - 19:01 | 941717 JonNadler
JonNadler's picture

DoChen

Couldn't you do all us trolls a favor and tell Jamie that the reason you stopped buying PM's was because of how scary our trolling was?

Can you tell him you were terrified by WilliamtheBastard's comments. Otherwise he'll end up homeless and he's got two kids and a fat wife to feed.

Otherwise is Blythe time for him, and I wouldn't wish that on my worst enemy

Tue, 02/08/2011 - 00:17 | 942231 DoChenRollingBearing
DoChenRollingBearing's picture

Schnitt yeah!  Yo trolls!  Don't believe the BS reason on my "Press Release" last week!  I AM REALLY SCARED now!  Trolls convinced me!

Especially BillytheB!  Terrifed!  

Au to $0.02!

And if it doesn't, well, you are right.  Serving him up to Blythe then becomes a must.

Mon, 02/07/2011 - 20:18 | 941905 DosZap
DosZap's picture

William,

 Dude, most of that gold is in strong hands, and the Chinese and Indians ALONE are going to TAKE 50% of the entire 2011 gold mined off the mkt this year alone. Then you have the Rooskies and the Turks. And all them little Sand Fiefs.

Mon, 02/07/2011 - 15:13 | 941084 hugovanderbubble
hugovanderbubble's picture

Long Land,Food and Hard assets:¡

Mon, 02/07/2011 - 15:13 | 941085 Azannoth
Azannoth's picture

I would much rather buy silver than gold, gold only evver accumulates and never gets destroyed while silver has a strong industrial demand and will constantly be in short supply

Mon, 02/07/2011 - 16:03 | 941213 EscapeKey
EscapeKey's picture

Get both. Gold for large scale transactions, silver for day-to-day.

Mon, 02/07/2011 - 16:22 | 941266 william the bastard
william the bastard's picture

Brass make good bathroom fixtures.

Mon, 02/07/2011 - 16:36 | 941309 EscapeKey
EscapeKey's picture

Lead makes for an excellent brain replacement, and is 100% guaranteed to make you post spurious anti-Gold comments.

Mon, 02/07/2011 - 18:40 | 941585 JonNadler
JonNadler's picture

bastard, you can't eat bathroom fixtures

although you might have eaten what's inside a bathroom fixture

 

Mon, 02/07/2011 - 18:33 | 941639 DoChenRollingBearing
DoChenRollingBearing's picture

@ Escape the Russian Spy

CORRECT!  Own both gold and silver!

Mon, 02/07/2011 - 20:22 | 941917 DosZap
DosZap's picture

60/40 is the mix.............(want to play it, paper).

Gold is, always has been MONEY.

Silver will do very well, but what do Banks hold and the very welathy, GOLD.

 

Mon, 02/07/2011 - 15:13 | 941086 Sean7k
Sean7k's picture

Historically, the country with the most gold wins.

Mon, 02/07/2011 - 16:13 | 941244 william the bastard
william the bastard's picture

Don't tell the Aztecs.

Mon, 02/07/2011 - 16:41 | 941322 Sean7k
Mon, 02/07/2011 - 16:54 | 941365 william the bastard
william the bastard's picture

Spain conquered the Aztecs, not "Europe". Tumbaga notwithstanding.

If that's not satisfying don't tell the Incas.

Mon, 02/07/2011 - 20:23 | 941919 DosZap
DosZap's picture

They didn't have Gunpower first.

Mon, 02/07/2011 - 15:46 | 941087 nuinut
nuinut's picture

Chinese using other avenues to gather in Gold too- Asian Buying and Tender of GLD for Bullion - KWN

FOFOA unravels the purpose and function of GLD- The View: A Classic Bank Run

 

Mon, 02/07/2011 - 18:35 | 941645 DoChenRollingBearing
DoChenRollingBearing's picture

FOFOA has been on a Hell of a run lately.  An excellent string of articles.

Mon, 02/07/2011 - 23:32 | 942180 Sean7k
Sean7k's picture

Great piece. Thanks.

Mon, 02/07/2011 - 15:14 | 941092 TradingJoe
TradingJoe's picture

Mr Sprott, who about them PHYS AND PSLV? Are they backed by physical PMs? Tell us about that, eh? As far as Physical PMs goes I am covered and don't really give a rats ass wether it goes down in value or up, as long as I can exchange it, when needed, for things inflation will have long created a "shortage" of! I only repeat myself, its all true and OK here on ZH but gees this fear mongering is just not it Tyler! I, (and am sure many others) aam getting tired of "end of the world" stuff! It will get ugly, yes and it will hit the unprepared really bad, yes and we will most likely wind up sleeping with a beretta under our pillows but...eventually it will all reset itself like a pc!

Mon, 02/07/2011 - 15:20 | 941102 Richard Head
Richard Head's picture

"Crashing like a hard drive" is more likely than your supposed innocuous "reset." 

Mon, 02/07/2011 - 15:43 | 941143 GoinFawr
GoinFawr's picture

You can't eat bluescreens!

Mon, 02/07/2011 - 15:39 | 941145 TradingJoe
TradingJoe's picture

I like crashing like a hard drive but am not sure it will go down that way! Who really knows how it will actually go down anyway?!?

Mon, 02/07/2011 - 15:45 | 941170 GoinFawr
GoinFawr's picture

"Who really knows how it will actually go down anyway?!?"

Nobody knows exactly 'how', but like you everyone has a pretty good idea of the direction...

Mon, 02/07/2011 - 19:09 | 941731 Dr. Sandi
Dr. Sandi's picture

That's damned simple. She's going down slowly.

Look around. The fact that you still have a computer and Internet means you're probably not as seriously affected as those who are no longer in the club. Not YET anyway.

Productive jobs create wealth. At least 1/4 of us don't have jobs and most of the rest of us have jobs that don't create wealth, but merely redistribute wealth or actually destroy it.

We're soaking in a slow collapse. Our economy is a big machine like an aircraft carrier or a computer network, rather than a motorcycle or a cellphone.

One crappy part can put your motorcycle or cellphone in the shop. Not much buffer there.

Big machines like city ships can have a lot of broken parts and remain more or less functional. But if you don't fix stuff as you go, eventually major systems start to pack it in. One day you find your ship doesn't generate electricity for all the systems anymore. Or maybe the screws don't turn. Or the elevators can't take the jets up and down for a ride anymore. Defer enough maintenace long enough and you no longer have a carrier, you have a giant hulk drifting with the tide, waiting for the salt to suck the life from the steel.

A national economy is just like a big ship. When it's in fighting condition, almost everything is working fairly well. But if parts of the economy start to fall apart, you can still keep cruising on 10% unemployment.

Maybe we cut a few shifts, routes and building temperatures to deal with sudden energy price surges. But we cruise on, just a little slower as we've done again and again.

The manufacturing jobs that underpin our service economy move outside the nation by the millions. But we tighten our belts and limp forward with what's left, as we're doing now.

Our wealth slowly leaks out of the economy through entropy as things wear out, collapse or become less efficient. When it's not replaced, as we're doing right now, we become less wealthy and must find new ways to keep the economy hobbling along. And we will.

Or at least, those of us still in good enough circumstances will because we always have. But we have to do it with less and less because we've given away much of our best in the pursuit of stuff that isn't really wealth. The big screen TV (yes I have one TOO!) the vacation home that's worth half of what we paid for it, the fabulous car that's now 6 years old.

But we're coping. And it's slowly crumbling around us.

The direction is most assuredly down. But it's not a crash, it's a crumble.

And as Madge, the nail salon lady used to say, "You're soaking in it."

The cookie will crumble in a lot of different ways for a lot of different people in a lot of different places. And for a lot of people living in their cars as they desparately seek the next job that doesn't exist, the fortune cookie has no fortune at all, just some empty calories.

And those people "camping" in their cars are just smugly thankful that they're not living on the street like the "homeless."

That's a crumble, not a crash.

Mon, 02/07/2011 - 23:44 | 942195 StychoKiller
StychoKiller's picture

Rust NEVER sleeps!

Tue, 02/08/2011 - 00:23 | 942236 DoChenRollingBearing
DoChenRollingBearing's picture

That was very good Dr. Sandi, nice summation.

Wed, 02/09/2011 - 00:33 | 945466 RockyRacoon
RockyRacoon's picture

Excellent!  You are in rare form here.   Your analogy reminds me of a definition of an acoholic's bottom that I heard recently:  "When things get worse faster than I can lower my standards."   All of a sudden one realizes that things ARE bad!   Then some really strange social things happen.  But, as you point out, it is variable amongst people, regions, and previous living standards.   Carry on Doc!

Mon, 02/07/2011 - 15:32 | 941130 Max Hunter
Max Hunter's picture

yes and we will most likely wind up sleeping with a beretta under our pillows but

Do you not justify the negative talk on ZH with your own comment here?.. Good grief.. If what you are saying is true, i'd conclude all of my fears were justified... Moron

Mon, 02/07/2011 - 15:45 | 941164 TradingJoe
TradingJoe's picture

"Mr Hunter":

weather my coments/opinions strike you as stupid or out of place,

it still does not give you the right to insult me!

I do have no problem with negative talk but under fear mongering I understand a totally

different thing, maybe you don't, sorry for that but stop insulting people on this site!

Eventually that will make you rather then me look like a moron!

Mon, 02/07/2011 - 19:08 | 941732 Max Hunter
Max Hunter's picture

Would you like some cheese to go with that wine??  This site is notorious for being an abrasive fight club.. If you can't handle it, I suggest you find out where all the other pussies are hanging out and go there..

If you don't want to be called a moron stop leaving stupid comments.

Mon, 02/07/2011 - 15:19 | 941099 Snidley Whipsnae
Snidley Whipsnae's picture

And this one went flying under the radar during Super Bowl distractions... Hat tip to Jesse at Cafe Americain...

"

politico.com reports, "Ambassadors from almost all 260 U.S. embassies, consulates and other posts in more than 180 countries are expected to convene at the State Department for what’s being billed as the first meeting of its kind."

huffingtonpost.com, "Secretary of State Hillary Rodham Clinton is convening an unprecedented mass meeting of U.S. ambassadors."

NOTE: There is an updated link at bottom of page. Clinton seems to be trying to get all the State Dept people on the same page with QDDR.

http://beforeitsnews.com/story/399/615/All_Ambassadors_Called_Back_to_Washington.html

Mon, 02/07/2011 - 15:27 | 941117 whatsinaname
whatsinaname's picture

Yes, thats to tell them that all the client countries need to have their populace pay more for food and energy and thats because the global banking system needs to be rescued !!

Mon, 02/07/2011 - 15:55 | 941190 Cash_is_Trash
Cash_is_Trash's picture

QDDR provides a blueprint for elevating American "civilian power" to better advance our national interests and to be a better partner to the U.S. military. Leading through civilian power means directing and coordinating the resources of all America's civilian agencies to prevent and resolve conflicts; help countries lift themselves out of poverty into prosperous, stable, and democratic states; and build global coalitions to address global problems.

 

I suppose it's damage assessment and prevention from the shit going down in the Arab World; which will certainly spread.

Hungry Trillionaires bitchezzz


Mon, 02/07/2011 - 20:33 | 941935 DosZap
DosZap's picture

QDDR,

Sunds like some brown shirt shit.

WHY would American civiesagencies get involved with other countries?

Shebitch!!, we're griggin treading water ourselves.These uber rich dicks make me want to expat.

Mon, 02/07/2011 - 18:38 | 941657 DoChenRollingBearing
DoChenRollingBearing's picture

Good catch Snidley!

Mon, 02/07/2011 - 19:53 | 941830 attst487
attst487's picture

kinda long but u can get the jist in first few minutes
http://www.youtube.com/watch?v=CR5jQ-pdW3Q

Fri, 02/25/2011 - 05:55 | 941955 Dr. Sandi
Dr. Sandi's picture

.

Mon, 02/07/2011 - 15:29 | 941121 tao400
tao400's picture

All of his funds are backed 100% by the physical metal.

Mon, 02/07/2011 - 16:30 | 941290 william the bastard
william the bastard's picture

In other news: Santa Claus is coming to town!

Mon, 02/07/2011 - 17:44 | 941519 tmosley
tmosley's picture

And all the little trolls rejoice, as they get to cover their shorts in the coal markets for free!

Mon, 02/07/2011 - 15:39 | 941140 Gordon Freeman
Gordon Freeman's picture

I'm a believer in the never-ending value of PMs, but I am fucking sick and tired of Eric Sprott endlessly talking his book:

Suppose, for example, the ICBC GAP plan were expanded to cover all ICBC depositors, and also expanded to the next four largest Chinese banks. Let’s further assume that the gold purchases within the plan enjoyed the same rate of growth as the test phase mentioned above. If we add all these numbers together, it results in gold purchases of an extra 300 tonnes of gold per year, or over 10% of the estimated 2010 global gold production.

Give. me. a. break.

Mon, 02/07/2011 - 15:46 | 941173 newworldorder
newworldorder's picture

With no disrespect for your position. The issue on the investment side of the ledger may not be Central Bank gold.

In my mind it's the GLD/SLV/JPM proxy gold. This is the giant and still invisible turd in the punchbowl. Once this is exposed all current bets are off.

Mon, 02/07/2011 - 16:15 | 941203 GoinFawr
GoinFawr's picture

Mr. Sprott talking his book is hardly surprising; less shocking is that after all his success a growing number of people are now listening. So if you are truly long physical in the last 5 years (or more) you owe him, IMHO.

His suppositions are extrapolations of a clearly defined trend rooted in actual events; it's not as if he is marking some toxic paper to 'skypie' and touting unpayable liabilities as assets in an attempt to bamboozle people into believing such losses can be grown(inflated) back to their 'modelled' value, that would be unconscionable...er, depending on the contents of your rolodex.

IE. Your sentiment isn't at all new, but Mr.Sprott's track record may well indicate that he is trying to 'give you a break'; possibly a lucky one if you pay attention.

Regards

 

 

Mon, 02/07/2011 - 16:55 | 941369 Temporalist
Temporalist's picture

It's not like he's claiming unemployment is down when there are fewer people counted in the rolls.  It's not like he's saying that QE will lower treasury rates and then simultaneously saying while the rate is increasing that is what is best.  It's not like he's marking-to-fantasy for real estate and crap derivatives.  It's not like he's pretending there is no inflation when it is apparent to everyone but kleptocrats that there is.

I guess some people would rather hear that there is no hurricane from the weather man when their carboard box is blowing down the road.

Mon, 02/07/2011 - 17:28 | 941475 DiverCity
DiverCity's picture

Plus one.

Mon, 02/07/2011 - 16:33 | 941297 traderjoe
traderjoe's picture

Have you seen any analyst on any news/business media outlet not talking their book?

Mon, 02/07/2011 - 18:14 | 941591 JonNadler
JonNadler's picture

me

Mon, 02/07/2011 - 18:39 | 941660 DoChenRollingBearing
DoChenRollingBearing's picture

Very good!   LOL....   Hahahaha!

Mon, 02/07/2011 - 19:15 | 941742 Hephasteus
Hephasteus's picture

JN FTW!!!

You should join the NRA.

I don't recommend you buy bullets. Bullets are very dangerous and you're likely to shoot yourself in the foot.

Fri, 02/25/2011 - 00:58 | 996020 latcho
latcho's picture

Analysts make sense, whether wright or wrong, you only make nonsense.
At least you make it trough the captcha.

Mon, 02/07/2011 - 15:39 | 941144 nontaxpayer
nontaxpayer's picture

You ride the boom bust cycle; gold is money ie liquidity that holds its purchasing power, you exchange it for wealth-creating assets that increase your wealth. When it booms and bubbles you sell out and buy gold again and ride the cycle again. No end of the world scenario necessary.

Mon, 02/07/2011 - 15:40 | 941146 rustybenelli
rustybenelli's picture

I read the disclosures for sprotts physical gold and it stated that ultimate delivery of your gold rested with the royal canadian mint.  My question would be how do you know if the same gold has not been sold multiple times.  The only way to take delivery is 400oz(minimum). I would have to read all the disclosures for all audits at that mint and check to see if the same numbered bars are not in some elses acoount.  I would rather own physical and not have any risk,especially in the current environment of corruption we live in. 

Mon, 02/07/2011 - 16:07 | 941230 Dr. Porkchop
Dr. Porkchop's picture

The RCM isn't a central or private bank, and the accounts are allocated. Whether that makes it any more trustworthy, I'm not sure.

Mon, 02/07/2011 - 17:11 | 941425 jesusfreakinco
jesusfreakinco's picture

It is audited.  Unlike other ponzi schemes - GLD, SLV, etc...

Mon, 02/07/2011 - 15:53 | 941183 Crispy
Crispy's picture

"According to the World Gold Council, Chinese retail demand for gold increased by 70% from October 2009 to September 2010"

 

Wow!

Mon, 02/07/2011 - 20:18 | 941908 Sunshine n Lollipops
Sunshine n Lollipops's picture

Hey, I'm a PM lover, too, but the World Gold Council has a dog in this hunt, as well.

Just sayin'.

Mon, 02/07/2011 - 15:57 | 941195 Stuck on Zero
Stuck on Zero's picture

Check this out:  http://harveyorgan.blogspot.com/

Near Zero Contango in COMEX Silver Future
Mon, 02/07/2011 - 19:14 | 941746 Dr. Sandi
Dr. Sandi's picture

Yep. People aren't willing to take a chance and wait for the silver. They want it now. And there's precious little of it loose out there.

Buy REAL silver now if you're planning to get some, if you can lay hands on it.

Even if you can't eat silver, it makes some fabulous silverware, so you can eat WITH it.

Mon, 02/07/2011 - 20:47 | 941960 Armchair Bear
Armchair Bear's picture

NTM silver flatware is a cost-effective way to get more ounces under your belt if you shop around...

Mon, 02/07/2011 - 21:26 | 942019 Armchair Bear
Armchair Bear's picture

NTM silver flatware is a cost-effective way to get more ounces under your belt if you shop around...

Mon, 02/07/2011 - 16:07 | 941224 Caviar Emptor
Caviar Emptor's picture

On a long enough timeline, the value of paper is zero. All ponzi schemes are based in paper assets that only have the value that dreamers accord them. 

The more they flood the world with a tsunami of paper, the more people's mistrust will grow. The more improbable the pyramid looks, the more people will want hard assets and shun paper. 

Mon, 02/07/2011 - 16:09 | 941234 Dr. Porkchop
Dr. Porkchop's picture

So what I keep learning from reading extensively is that all fiat currencies eventually go to zero, and all empires eventually collapse.

Mon, 02/07/2011 - 16:32 | 941295 bronzie
bronzie's picture

" all fiat currencies eventually go to zero"

the average lifespan of a fiat currency is less than 40 years

the US dollar has been pure fiat since 1971 when Nixon closed the gold window

that's 40 years

Mon, 02/07/2011 - 16:30 | 941287 jomama
jomama's picture

did he really mention Jim Cramer?

 

 

Mon, 02/07/2011 - 16:32 | 941292 Trigga
Trigga's picture

3:21 PM JPMorgan (JPM) will start accepting physical gold as collateral against securities lending and repos, making it the first tri-party agent to do so. The bank plans to start accepting other precious metals and commodities as collateral later in the year.

Mon, 02/07/2011 - 16:34 | 941302 william the bastard
william the bastard's picture

Who pays the postage?

Mon, 02/07/2011 - 16:42 | 941323 gwar5
gwar5's picture

Well, it's safe with JPM! What could go wrong?

But they're really sweating the PM's aren't they?

Mon, 02/07/2011 - 16:47 | 941340 apberusdisvet
apberusdisvet's picture

Sprott is obviously talking his book but he is also an expert in PMs and the miners.  All of the junior miners that Sprott has invested for his various funds are up an average of 225% in just 4 years; hard to argue with dem apples.

Mon, 02/07/2011 - 16:48 | 941341 gwar5
gwar5's picture

10% Chinese inflation has really bumped up the gold buying by the average Chinese.

Chinese govt. are also using GLD to get physical by redeeming for the physical gold out of GLD.  (GATA)

Chinese are fighting back against Bernankeflation and the big banks very deftly.

 

Mon, 02/07/2011 - 16:47 | 941342 Lord Koos
Lord Koos's picture

The Chinese government officially encourages its citizens to buy gold.  The USA, not so much -- which country actually cares about their citizens' wellfare?

Mon, 02/07/2011 - 16:49 | 941350 gwar5
gwar5's picture

Anybody holding FRNs are Chinese now.

Pretty pathetic that we get better information from the communist Chinese.

Mon, 02/07/2011 - 17:11 | 941424 sellstop
sellstop's picture

People are starting to SAVE in gold. People are starting to cash in their "world's reserve currency" for gold. I suspect they are investing in a cost averageing way for the long term. Got mine....

 

gh

Mon, 02/07/2011 - 17:17 | 941433 sgorem
sgorem's picture

Mon, 02/07/2011 - 17:34 | 941499 sellstop
sellstop's picture

O'kay. Just trying out my new picture. That's my fathers sister being held there.

Mon, 02/07/2011 - 18:26 | 941618 trendybull459
trendybull459's picture

my alcoholic neighbour asked me if i have some copper,i asked him(like i stupid in garden only):why?

He was hiding his eyes in order to hide his plan....

Guys,since masses in alcoholic state demanding copper,this telling the top arrival for all thoose preciousness of metals,last time it was in 2008 when owner of apparts i rent was collecting pots and other aluminium kitchen applies/tools,i asked him :for what are you collecting it,the prices is overvalued and it should crash any moment?"

Hhhh,it pays a lot of money...he said.........

two days later metals crashed into pieces

I can understand buying gold up to 500 and silver up to 10,but guys,its overvalued by any standards,how you gonna to pay in russian food market or store or in middle east?or in Europe?before the gold going up the JP Morgan&Co will make sure you left no coin,also to thoose reffering to the indian and chinies families-1.all of them have a good record of gold confiscation in that or that form2.Where they were when it was declining from 380$ into 250$?Now at the 1300$ they should become smart?I have a news for you from Moscow jewellery sales report:sales so weak that the stores making up to 80% discounts to invite people to visit shop to buy.

I would may be buy gold at 800-900 level or even 750,depend how low we go,but i do not buy by any means from now,i let my dollars expire with world revolution rather echange it into overvalued gold

Mon, 02/07/2011 - 18:48 | 941684 hampsterwheel
hampsterwheel's picture

Gold and silver are not equities - they have no P/E; so how can you use the term "overvalued"? I am pretty sure you don't understand the concept of money...

If your going to wait for $800 you'll never own gold - there are buyers at ever dip ...

Mon, 02/07/2011 - 19:35 | 941786 trendybull459
trendybull459's picture

I have to pay now for tomatos 3,avocado-3,onion-3,cucumbers -3,carrot-3,bananas-5,it fluktuates in nominal currency and its cheap compare to currency $,gold has purchasing power and fruits and vegetables kind of commodities,soft,which could be limited in time,so,taking it prices the gold is too expensive,i can leave and not care about gold existance with prices we have,i have small garden too,i'm professional trader in gold/equities,its overvalued by all my means,i have enough gold in coins bought at 250$ ounce in 2002,i do not need more,gold is illiquide for buing equities representing real businesses ownership and productive-gold is not,so,who ever dream to get gold at 800-its his,i would buy stocks of producers of the products needed to us,gold hedge but never will be currency again untill Great World Revolution-but we had history of Bolsheviks and Roosvelt,all they confiscated gold,be prepaired for that or other confiscation

Mon, 02/07/2011 - 19:18 | 941753 Dr. Sandi
Dr. Sandi's picture

i let my dollars expire with world revolution rather echange it into overvalued gold

I fully support your plan. We face a future of decreasing resources. This means too many people, not enough stuff.

Mon, 02/07/2011 - 19:39 | 941795 trendybull459
trendybull459's picture

no one talking about depleting cash in the people pockets ,when you starv -you no gonna buy gold,also domestic dealers do nto sell phisical staf to you-most custodies taking charge on your gold misleading you about international laws,untill you are PHD g-z in international Laws,try to bring with you gold over 10ounces-you can get in in some countries and never out,so......Revolution and gold back into the ground,fare conditions and FED liquidation

Mon, 02/07/2011 - 20:15 | 941903 attst487
attst487's picture

alco neighbor wants copper=bubble but nobody buying gold=bubble? i dont get the logic. in communist russia the logic gets you.

Mon, 02/07/2011 - 23:46 | 942196 fellatio is not...
fellatio is not fattening's picture

Good idea Trendy, save your money now and use it for english classes, than buy gold and other PM's, but to buy gold and not be able to spell is a waste of money

Mon, 02/07/2011 - 18:39 | 941661 trendybull459
trendybull459's picture

PS  the words from  article :According to the World Gold Council, Chinese retail demand for gold increased by 70% from October 2009 to September 2010, representing a total of 153.2 tonnes of gold imports. Yet, over the same period, the demand for gold jewelry rose by only 8%.

 The Gold coincel and gold companies are formed cartel for saling their product to all of us and they are who cost us spoiled water supply,nature and ecological disasters,i remember how gold counsil was wining back into 2000-2002,untill some guys whos name i will not call out was advertising gold as investment idea rather sponsoring jewelier production.My nearby other religiouse naighbour 23y.o intensively asking be every day on the spot silver prices,he got analytics telling him it going to 50$ and gold to the 2500,when i asked him how many years they are in the markets,he said 25.Then i asked him to ask them what they were doing in 1998-2002,because no one was then bullish on gold exlcuding some small part of the people in different countries,it will be panic of selling gold and we have to see how thoose ETFs will liquidate it-to buy they learned,but i think liquidation will be direct into banks vaults for discount of some 70-80% :)))))))))))),JP Morgan Chase has prepared place.Also guys,think twice about indians earning 100$ month and indians earning 1000$ a month,there a lot of the stories only about middle class growing in thoose countries,they not storing gold as you think,nor for thoose prices,stop brainwash allready brainwashed individual investor leaving on last margin!!!

Ahh,i can spend my money on sexy girls,i forgot,they will be better of gold,they will wish to eat and they have no funds,i make two good things then

Mon, 02/07/2011 - 19:26 | 941767 Hephasteus
Hephasteus's picture

WTF?

Mon, 02/07/2011 - 19:03 | 941722 Camtender
Camtender's picture

But................ Dave Ramsey said gold was a horrible invetment.............

Dave went bankrupt in real estate, and now wants to sell you books on how to invest.

http://www.daveramsey.com/article/dont-buy-gold-sell-it/lifeandmoney_other/

Mon, 02/07/2011 - 21:03 | 941992 hampsterwheel
hampsterwheel's picture

Is this also the guy whom wants you to pay off your home now with more valuable dollars so you don't have to use cheaper inflated future dollars? I never understood that....

Mon, 02/07/2011 - 19:45 | 941810 Silversinner
Silversinner's picture

Most west Europe country's plus

America have about one ounce of

gold per kapita in central bank(officially)

For china to reach this ratio,they would

have to accumulate 30.000+tons.

The money $ is there but the gold

simply is not.(one ounce per chinese

is about 1.75trillion at todays market price)

 

Mon, 02/07/2011 - 20:03 | 941878 Dr. Sandi
Dr. Sandi's picture

Which is precisely why the price of gold is going to the moon, Alice!

Mon, 02/07/2011 - 19:54 | 941834 buzlightening
buzlightening's picture

DIMMS Dumb Ignorant Mental Midget Sheople who think worthless fiat can be eaten!!  Does anyone in AmeriCON'd know an actual monetary store of value outside paper fiat dollars!!  Hardly 1 in a million if not 2 million!! Lines goon-a get long for the gov goon cheeze whiz free lunch/welfare crowd!!!

Mon, 02/07/2011 - 19:59 | 941869 Dr. Sandi
Dr. Sandi's picture

I'm gonna trade all my fiat for a cheeze whiz factory!

They'll literally be eating out of my hand when the big crumble comes their way.

Mon, 02/07/2011 - 20:21 | 941916 attst487
attst487's picture

if they'll literally be eating out of your hand then im going long wetwipes and std shots, all your profits will be mine! ;)

Fri, 02/25/2011 - 05:55 | 941929 Dr. Sandi
Dr. Sandi's picture

.

Mon, 02/07/2011 - 21:11 | 942003 vitaminc
vitaminc's picture

Worthless article.  Eric Sprott talking his books.

Mon, 02/07/2011 - 23:37 | 942188 fellatio is not...
fellatio is not fattening's picture

Talking your book is fine if you give honest accurate facts, but to talk your book while giving out bogus info i.e. the housing industry in 2006-07 is crap.  Agree/disagree

Mon, 02/07/2011 - 23:06 | 942145 AustrianEconomist
AustrianEconomist's picture

Great article. With the Fed currently planning QE3 we know that more digital dollars are going to flood the markets and further drive commodity inflation.

Check out the Capital Research Institute

www.capitalresearchinstitute.org

Fed Accounting: Negative Liabilities

Last week, the Fed passed a change in Fed accounting rules which were not picked up by analysts and journalists days later, because the new rules were released in a standard weekly report. Basically, the Fed does not have to account for losses on assets anymore with an accounting trick called “negative liability”. This allows the Fed to effectively transfer its assets if they lose in value to the Treasury and then pay it off with future earnings. The new rules give the Fed protection from insolvency due to future interest rate hikes and minimize the impact on its massive bond holdings. Effectively the changes will let the Fed move junk securities off balance sheet, therefore letting it incur substantial losses without impacting its capital.

Tue, 02/08/2011 - 01:40 | 942308 ak_khanna
ak_khanna's picture

One thing I fail to understand is that why most analysts are recommending the purchase of Gold as a safe investment? The problem today is that the price of Gold is not derived by it's physical demand or supply but more by the speculative positions standing long or short on the commodity exchange like any other traded commodity, stock or currency.

The basic mechanism of price discovery (based on demand and supply for actual use) of anything traded on an exchange has been terminally infected by speculators having access to unlimited funds and super fast computers for trading leading to volatile price swings. This has been made worse by the launch of ETFs for anything and everything under the sun by the financial community.

The price of everything including Gold is likely to suffer when the speculators unwind their positions due to some event that they have not anticipated or foreseen.

http://www.marketoracle.co.uk/Article24581.html

Fri, 02/25/2011 - 05:56 | 942364 Dr. Sandi
Dr. Sandi's picture

.

Tue, 02/08/2011 - 05:48 | 942391 tradewithdave
tradewithdave's picture

"Peace, love & silver," Don Cornelius

Check out this Soul Train... it goes backwards. 

http://tradewithdave.com/?p=5293

Dave Harrison

tradewithdave.com  

Tue, 02/08/2011 - 07:07 | 942413 BigDuke6
BigDuke6's picture

Jeez, i read the article hoping for some insight into the gold dynamics - and the comments descend into an 'eating gold' and skinning rabbits free for all.

Sheesh.   i found myself looking at a farm on a real estate website yesterday - will you people settle down!!

making everybody jumpy....

Fri, 02/25/2011 - 05:55 | 944477 Dr. Sandi
Dr. Sandi's picture

.

Tue, 02/08/2011 - 09:48 | 942597 ZeroHour
ZeroHour's picture

.

Do NOT follow this link or you will be banned from the site!