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Eric Sprott On How Central Banks Are Setting The Stage For The Next Big Move In Gold

Tyler Durden's picture





 

A brief look at the contentious gold/central bank history as it is about to rhyme all over again:

The Federal Reserve System was created in 1913 on a promise of stabilizing the banking system. What followed instead was an unprecedented growth in fractional reserve banking, as well as the money supply, which helped fuel the roaring 20’s. The aggressive money printing created inflated values in bonds and stocks, which peaked in 1929. When the market began its precipitous slide, and the public began to realize that stock and bond values were artificially high, the populace began to convert its cash holdings into gold. The government lacked the ability to satisfy that demand and was thus forced to renege on the currency’s founding promise of gold convertibility. It’s important to point out that without this original promise of convertibility for citizens, the currency may never have been adopted.

In 1933, The Gold Reserve Act was passed by Congress and formalized into law the breaking of the gold standard. This law provided for a controlled-currency issue through the Federal Reserve System which was non-redeemable in gold. Although the link to anything tangible had been broken, the citizens had little choice but to continue using these non-redeemable dollars as a medium of exchange. The currency had already been broadly accepted, proven convenient and a perception of safety had already become entrenched.

After forty years of continued dollar printing, in August, 1971, President Nixon effectively declared the US dollar to be a completely “fiat” currency by refusing to allow foreign governments to convert their US dollar holdings into gold. The right of conversion which had been granted under the post World War II, Bretton Woods agreement could not be honoured because of decades of money supply expansion. The original ‘promise’, which had vaulted US dollar to its status as a global reserve currency and a stable store of value, was now completely broken.

These historical events resulted in a world in which all currencies are fiat; they are not backed by gold or any other tangible asset. The supply is infinite. In fact, the production of today’s newly created paper money in relation to historical commodity-based money is akin to counterfeiting. A US dollar printed today has no ties to anything tangible and as a result carries only four cents of the equivalent purchasing power of a gold-backed dollar of 1913. It is ironic that in a poor choice of wording on Wikipedia, the definition of counterfeiting states that “it is usually pursued aggressively by all governments.” It is only because the evolution of money has occurred slowly over generations that the obvious flaw with fiat currency is not widely understood.

Why Gold, as a consequence of 90 years of paper debasement, will be the next big thing.

We are gold investors because we have made a specific and calculated bet against paper money. Simply put, we are betting against paper money as a store of value. We believe its supply will continue to increase. We do not believe that the world’s major governments have any stake left in protecting it. Government debt loads have grown so massive that printing them away has become obligatory - there is no longer any other feasible option left. In our view, the savers of the world should already be outraged by the dilution they have been forced to suffer at the hands of the Central Banks. Are we to infer that the limited reaction of savers to the combination of zero interest rates and debasement of currency is a result of “learned helplessness”?

In our opinion, the lack of overt inflation to date due to the "successful" implementation of globalization, aka exporting inflation to China and anyone else who needs to purchase US securities, is the sole reason why there has not been an explosion in fiat-denominated prices to date. Yet as Zero Hedge has been pointing out for several months, the global trade picture is now dramatically changed, and China will need to look inward rather than outward. This means, that sooner or later exporting inflation as a fiat policy will fail. When pundits finally comprehend this and start blaring about it every day on CNBC, that is when the rush to gold (plated) safety will finally become acute.

And since in a fiat-debased world, everyone wonders where gold will hit (which in principle is the wrong question, as monetary representation of value will very likely cease should Central Banks finally lose control over the infinite dilution mechanism), here is what Sprott believes:

We also wanted to prepare our readers and clients for the next leg of the gold bull market as it will prove to be extremely volatile. Gold bull markets are unique in that buying becomes driven by both fear and greed. Gold is quickly moving into the hands of those who are unwilling to gamble on fiat currencies or bonds as a store a value. The new owners of gold are unconcerned with its lack of yield but instead are focused on its historic ability to preserve wealth and its unquestionable value. Given the difficulty we have valuing paper money, it becomes extremely difficult to come up with a reasoned price target for gold. Today’s gold market is significantly different from the gold market of the 1970s for two reasons: 1) Central Banks are more likely to be buyers of gold today and 2) They clearly have little ability to dramatically raise interest rates with the massive increases in government issued debt. Thus, it is easy to envision a similar twenty-five fold increase in the gold price that was seen between 1970 and 1980, which would result in a gold price today above $6,000 per ounce. We expect the often quoted “1980 inflation adjusted high” of approximately $2,200 to be achieved in short order. These targets may well prove to be irrelevant, however, as the quality of our lives will be more greatly impacted by the continued evolution of our money and how the general public chooses to value it, or not.

Read the full note here.

 

And when you are done, here is another just released note from Sprott's John Embry, in which he expects gold to go up by 30% in the near-term.

 


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Sat, 01/30/2010 - 15:45 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Gold fears not the fire of the furnace.

Sun, 01/31/2010 - 02:59 | Link to Comment Keyser Soze
Keyser Soze's picture

Sure, but neither do most resources. I'd still rather have one that has more of a supply-demand characteristic. Like Jim Rogers said aeons ago "I don't know what tomorrow's inflation hedge will be".

 

Last year, when the world tanked, what happened to gold? Everyone went to the dollar! If people are dumb enough to do that, then they're dumb enough to make the same mistake again.

Sun, 01/31/2010 - 04:31 | Link to Comment Nout Wellink
Nout Wellink's picture

The world tanked because of huge deflationary forces. A total deflationary collapse was threatened. In such a case cash = king. All other assets will be smashed. Including gold.

Sun, 01/31/2010 - 07:17 | Link to Comment Anonymous
Sun, 01/31/2010 - 22:15 | Link to Comment Anonymous
Sun, 01/31/2010 - 16:45 | Link to Comment 1984
1984's picture

Last year everyone went to the dollar not because they're in love with it, but because it was a margin call of epic proportions.  You need dollars to pay back debt.  The stupidity happened earlier when they all leveraged up.

 

Sun, 01/31/2010 - 08:23 | Link to Comment Anonymous
Sun, 01/31/2010 - 16:33 | Link to Comment Anonymous
Sun, 01/31/2010 - 22:12 | Link to Comment Anonymous
Sun, 01/31/2010 - 22:08 | Link to Comment Anonymous
Sat, 01/30/2010 - 15:47 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Sprott is very respected in the gold community.  Thanks for posting this!

Sat, 01/30/2010 - 23:51 | Link to Comment MarketTruth
MarketTruth's picture

Agreed, Sprott is highly regarded worldwide. Many thanks ZH for posting this valuable info.

Sun, 01/31/2010 - 01:43 | Link to Comment StuntPope
StuntPope's picture

It's not that Sprott is well respected in the "gold community", Sprott and his team are among the most successful investors and money managers Canada has ever produced. And they happen to be very bullish on gold. (In other words, they aren't goldbugs for the sake of being goldbugs - they're extremely successful money managers who have come to the conclusion that gold is going up - in fiat currency terms)

Sun, 01/31/2010 - 02:54 | Link to Comment SNAFU
SNAFU's picture

Even JPMorgan projects AU to be at $1400 2qtr 2010; but then declining.

Sat, 01/30/2010 - 15:51 | Link to Comment Segestan
Segestan's picture

With all the huge effort being made to discredit Gold , nice to read a realistic , honest analysis.

Sun, 01/31/2010 - 13:25 | Link to Comment Doc Brown
Doc Brown's picture

www.technicalindicators.com/gold.htm

Please keep in mind when a CB is diversifying

it's portfolio into gold don't assume it's in

the open market. Ru bought gold last year from it's own producers. China is one of the largest producers of gold again they

will add to their position from their own mines first. Canada is a commodities based economy gold being one of them. Jewelry

demand is down 32% which usually represents 70% of worldwide demand for gold. Total demand for all uses including ETF's is down

36%. Outlook Dollar your call. In sum there are a mosaic of considerations that must be weighed from the perspective of what type of buyer and seller

you are

when considering buying gold.  From a pure supply/demand presently there

is plenty around from a multiple of sources if you need to have it yesterday.

Sat, 01/30/2010 - 16:00 | Link to Comment dogbreath
Sat, 01/30/2010 - 16:03 | Link to Comment Rusty_Shackleford
Rusty_Shackleford's picture

Gold and silver are to be bought.

Sat, 01/30/2010 - 16:10 | Link to Comment Anonymous
Sun, 01/31/2010 - 03:02 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

You'll have to rely on your guns and ammo to get it. He who procrastinates......

Sun, 01/31/2010 - 09:49 | Link to Comment ToNYC
ToNYC's picture

Have you considered when and how you will be able to sleep after you actually begin to use your guns n' ammo?  The Army is in Fort Knox not to protect the Gold which maybe wrapped like Chanukkah gelt, but to protect the status-quo. Media of exchange are hard to come by, but locally and within your club or tribe, and Gold doesn't cut the mustard when you factor in the security necessary to use it more than once or twice and the likes of Fred C. Dobbs.

Sun, 01/31/2010 - 11:30 | Link to Comment Crime of the Century
Crime of the Century's picture

Not all of us are as fortunate as you to live in NYC. (Been there, done that, refused the t-shirt). You are constantly on these threads like a moth/flame, spreading your Kunstlerian FUD. I, on the other hand have better spent my time reading history with my fiction. Argentina wasn't even that long ago, and contemporary analysis says "PMs are insurance, ignore at you own peril". Home defense of the crime of home invasion is still legal in this country. I, for one, have no problem with that.

Sat, 01/30/2010 - 16:38 | Link to Comment Anonymous
Sun, 01/31/2010 - 12:17 | Link to Comment Stevm30
Stevm30's picture

Personally, I don't understand why there is not more discussion of silver.  The amount of silver mined in history relative to gold is about 10:1... Historically silver traded at a ratio of about 15:1 (silver to gold)... now it's what 65:1?  But when commodies begin to be used again as money, silver will be critical.  Even with gold at 1100/oz, it much too valuable to be used for everyday transactions... Silver, not so much.  I predict that the demand for silver will skyrocket when we come off this bizarre fiat currency system - as people look for something of value to trade... the essential qualities of silver (and gold) will rise again and the same reasons they were valued in the past will ressurect them.

Mon, 02/01/2010 - 07:47 | Link to Comment Observer
Observer's picture

Silver also has other neccesary uses apart from being an ornament unlike gold so it's valuation has a broader basis.

Sun, 01/31/2010 - 12:17 | Link to Comment Stevm30
Stevm30's picture

double post - sorry

Sat, 01/30/2010 - 19:19 | Link to Comment Anonymous
Sun, 01/31/2010 - 11:32 | Link to Comment Crime of the Century
Crime of the Century's picture

I don't know about the "Beijing Put", but India's CB bought a not insignificant 200mt at approx $1045, so I would expect that range to draw considerable interest again should it be reached.

Sat, 01/30/2010 - 16:08 | Link to Comment Anonymous
Sat, 01/30/2010 - 16:12 | Link to Comment Anonymous
Sun, 01/31/2010 - 01:59 | Link to Comment Anonymous
Sun, 01/31/2010 - 12:35 | Link to Comment Stevm30
Stevm30's picture

Great post.

 

"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." Lord Acton

Sat, 01/30/2010 - 16:15 | Link to Comment dumpster
dumpster's picture

tyler thanks for the sprott article and opinion on gold

 

it seems like the opinions about gold from many on this board are based on nothing but brain washing and growing up in world of harvard and keynesian economics.. look out the window see whats happening .. lol

 

.

 

 

 

 

 

Sat, 01/30/2010 - 16:18 | Link to Comment Creative Destru...
Creative Destruction Engineering's picture

There will come a time when nobody will accept paper money for their gold.  Only then will the masses understand the nature of fiat currency.

In the words of Marc Faber, "We are doomed."  Then he chuckles.  You would chuckle too, if you are prepared.

Sat, 01/30/2010 - 16:38 | Link to Comment dumpster
dumpster's picture

and the time is coming gold can not be bought for any price .

 

silver will then be the common mans purchase of choice .. but most will wait .  as they are in the vortex of mass ignorance on the nature of money.   nobodys debt, no counter party risk .  

 

can not be dreamed into existence . 

but sadly even here . most will not get it. lol

 

Sat, 01/30/2010 - 17:01 | Link to Comment Anonymous
Sun, 01/31/2010 - 00:07 | Link to Comment Oracle of Kypseli
Oracle of Kypseli's picture

When governments devalue money, the only wealth preservation is precious metals, agri-land and non-perishable goods that can be traded. Digital or paper dollars are okay for daily consumption. As you get paid, you spend, when you have extra, you buy gold.
You will never be sorry. Yes you may not have the artificial and temporary stock/bond market gains (taxable)during boom cycles, but you will never loose.

Gold 25%-50% of your assets depending on the economic conditions.

Gold bullion is not reportable (taxable) if you sell less than 25-30 oz or so each time. 

Mon, 02/01/2010 - 07:57 | Link to Comment Observer
Observer's picture

very sensible observation although I wouldn't invest all my extra money in gold. probably silver and stock as well

Sun, 01/31/2010 - 09:02 | Link to Comment Anonymous
Sun, 01/31/2010 - 10:21 | Link to Comment boooyaaaah
boooyaaaah's picture

I too use paper money for candy bars, lunch at subway, tips, and junk

I use plastic cards for everything else including gas

I pay bills on line

If big government was big enough in the 30's to prohibit ownership of gold --- they are big enough now

What will be the future of currency?

Try an implanted computer chip

If your government is corrupt and you think owning gold will save you, then you are like an ostrich with your head in a bag of gold.

The only salvation in this world is to change the government while we still have a vote

Eventually even that remedy will be gone

Rev 13:16-17
 He also forced everyone, small and great, rich and poor, free and slave, to receive a mark on his right hand or on his forehead, 17 so that no one could buy or sell unless he had the mark, which is the name of the beast or the number of his name.

 

 

 

Mon, 02/01/2010 - 07:53 | Link to Comment Observer
Observer's picture

I agree. very incisive observation

Sat, 01/30/2010 - 16:29 | Link to Comment Anonymous
Sat, 01/30/2010 - 16:31 | Link to Comment dumpster
dumpster's picture

sprott remarks

However, despite my consistent enthusiasm for the yellow metal once termed a "barbarous relic" by Lord Keynes, I still have the strong feeling that the vast majority of investors outside this room still haven’t got a clue about gold and they are certainly not aware that gold is experiencing a historic bull market with much, much further to go. What we have seen to date is merely a prelude, and the appreciation we are going to see in future years is going to greatly exceed what we have seen to date. This opinion is based on a number of factors I will expand on, but the predominant theme is that gold is re-establishing itself as money

Sat, 01/30/2010 - 16:47 | Link to Comment dumpster
dumpster's picture

 

sinclairs site

http://jsmineset.com/

 

has some more sprott stuff ..

Sat, 01/30/2010 - 16:51 | Link to Comment yy
yy's picture

Before you guys go out and convert your wealth to Gold,a few points

1. If it gives you peace of mind than have some.

2. No matter what the monetary medium is (paper, gold, whatever), the key is its use in commerce. Gold is simply hard to use. In fact  paper money is soon to be gone, it is just electrons we have! And they seem to be just fine at enabling people to barter goods and services (no matter what the medium is).

3. No matter what happens to the fake world of central banks, energy, metals, agricultural commodities and their assoicates will have DEMAND and SUPPLY balances that one rather observe to preserve wealth.

 

4. Preserving wealth even in the 21st century can be had through old fashioned things like real-estate, farm land, barrels of oil (or ethanol of you wish), bushels of wheat etc. If you own your house, then you don't care about the monetary medium, gold and dead Zimbabwe dollars are alike, you can prices it as 500 OZ of gold or 10 Giga trillion Zim Dollars, or 8000 barrels of oil...

 

5. Bottom line, gold shines, but rational observation of human needs and wants is really what counts.

Sat, 01/30/2010 - 17:02 | Link to Comment Anonymous
Sat, 01/30/2010 - 17:54 | Link to Comment Anonymous
Sat, 01/30/2010 - 23:51 | Link to Comment Gold...Bitches
Gold...Bitches's picture

boy, there are a bunch of things that you have wrong, but the most simple one is your assertion that its just too cumbersome.  You then say that its soon to be all electronic.  Well, so what?  The electrons are still representative of some amount of FRN's whenever they do try and go all electronic.  

Ever heard of Goldmoney? or Egold?  You see, they do this fascinating thing with physical gold where they hold it and then, heres the crazy part, they credit your electronic account with a dollar balance that is backed by gold.  I know, wayyy out there, huh?  So you see, there already is electronic gold.

 

Your fallacy is in equating any electronic payment or transfer of FRN's to be the only basis upon which a dollar denominated market can exist.  The whole question has always and always will be "What is the dollar backed by - the full faith of the govt (cough), or some commodity?"  And if it is some commodity, the world population, not some elites in Davos, have always chosen gold as the medium of exchange.  And as to charges that the total value isnt enough to do that now... well, a new revaluation to some number 1,000's higher than today gets the paper and real money back into relation. 

Mon, 02/01/2010 - 08:08 | Link to Comment Observer
Observer's picture

All true but still means we have to 'trust' someone to hold the gold that backs our egold. who's going to do that in large numbers; governments? central banks or banks maybe? currency exists to facilitate commerce. otherwise it is worthless. gold has no industrial use. we just fancy it. so we need a currency that derives it's value from the commerce it generates, maybe one backed by a combination of stocks and bonds which generate earnings based on commercial activity as pointed out by mikla in his post on a new currency

Sun, 01/31/2010 - 03:16 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

Sprott was right! Confusion reigns supreme. Dear oh dear.

Sat, 01/30/2010 - 16:59 | Link to Comment dumpster
dumpster's picture

so have you 10% or your holdings in gold

 

and who are you ,, lol

 

to pronounce this idea that gold is cumbersome , and can not be a used in internation commerce

 

go tell that to the nations of the earth when they will only trade in a gold proxy, here my oil . please pay in gold . heres our sweat and toil .. pay in gold .

nixon plunder the nations as he refused to honor gold .

 

betyou a if you had gold . you would find a way to use it ,

 

to eat... to protect your lifes work..

most of what you say is worn over keynesian disinformation,, regergitated in worn over and old cloth . /

obviously you will one day learn . 

Sat, 01/30/2010 - 17:03 | Link to Comment Anonymous
Sat, 01/30/2010 - 17:15 | Link to Comment dumpster
dumpster's picture

kindergarten sucks even worse .. especially for the deaf and blind lol

Sat, 01/30/2010 - 17:38 | Link to Comment PolishHammer
PolishHammer's picture

you're eligible for special olympics with this post

 

or the NBA

Sat, 01/30/2010 - 20:21 | Link to Comment BobPaulson
BobPaulson's picture

Don't dis S.O.

Sat, 01/30/2010 - 23:54 | Link to Comment MarketTruth
MarketTruth's picture

Ask those in Zimbabwe about paper money versus gold. See video at www.youtube.com/watch?v=s3LdNxV0yPM

Sat, 01/30/2010 - 17:12 | Link to Comment Anonymous
Sat, 01/30/2010 - 20:06 | Link to Comment Reven
Reven's picture

Simple, fiat currency can be artificially increased in quantity.  Expansion of the gold supply requires digging more up and there's only so much that can be dug up each year.  Almost all the gold that has ever been mined still exists in someone's posession, that should tell you a lot.  If we had a federal reserve that wasn't infiltrated with people who are brainwashed and believe inflation is beneficial to the economy, fiat could be stable.  But the temptation to print and borrow is too great.

Sat, 01/30/2010 - 20:09 | Link to Comment Carl Marks
Carl Marks's picture

Gold is a store of value. Compare the price of an ounce of gold in 1913 and 2010.

Sat, 01/30/2010 - 21:54 | Link to Comment delacroix
delacroix's picture

90% of the silver ever mined, has been used up in industry

Sat, 01/30/2010 - 20:45 | Link to Comment Anonymous
Sun, 01/31/2010 - 03:27 | Link to Comment Anonymous
Sat, 01/30/2010 - 23:05 | Link to Comment dogbreath
dogbreath's picture

An amatuer troll with no name.  Next you will predict gold is on its way to 600.  Go away.

 

Sun, 01/31/2010 - 02:30 | Link to Comment Anonymous
Sun, 01/31/2010 - 07:53 | Link to Comment 1984
1984's picture

600 what?  Oz of silver?

Sun, 01/31/2010 - 01:24 | Link to Comment Anonymous
Sun, 01/31/2010 - 11:39 | Link to Comment Crime of the Century
Crime of the Century's picture

Painfully obtuse. Bask in your anonymity...

Gold must be mined and refined, cast, minted, assayed. Fiat is paper and ink or the wave of an electronic wand. You sit in the front row and gasp in awe at the bullshit alchemists.

Sun, 01/31/2010 - 15:12 | Link to Comment Anonymous
Mon, 02/01/2010 - 08:12 | Link to Comment Observer
Observer's picture

naw..we indians just have been seduced by it!

Sat, 01/30/2010 - 17:25 | Link to Comment Anonymous
Sat, 01/30/2010 - 19:52 | Link to Comment Anonymous
Sat, 01/30/2010 - 20:26 | Link to Comment BobPaulson
BobPaulson's picture

What do you mean, who will pay for it? If the price is 6k that would mean somebody is paying for it. It's called a market.

If you're actually talking about a "Road Warrior" scenario maybe (even then, Zimbabwe is close to RW status and people are buying bread with specks of gold dust) but when it was over 2000 in today's dollars people were obviously buying and selling it to establish that price.

Sat, 01/30/2010 - 20:28 | Link to Comment Master Bates
Master Bates's picture

And then the market crashed and people were like "Damn, why'd I have to buy all that gold?  Now I'm broke, bitchez!"

Sat, 01/30/2010 - 21:25 | Link to Comment Molon Labe
Molon Labe's picture

You're right, stick with equities.

Or tulips if you can get 'em.

(BTW, I didn't junk you.  I would never junk a post that used the word bitchez.)

Sat, 01/30/2010 - 21:50 | Link to Comment whacked
whacked's picture

+1

 

Even a 40% devaluation of the fiat currency will still mean that paper currency is the currency. Amazed that people are eager to forget.

 

Go read Gailbraith sometime and understand the concept that we can even have shells that are more valuable than gold.

Sun, 01/31/2010 - 00:27 | Link to Comment dogbreath
dogbreath's picture

"Even a 40% devaluation of the fiat currency will still mean that paper currency is the currency"

Only untill someone or everyone will no longer accept the paper money or only at a severe discount. 

But with Gold you will purchase the same or more goods as you did before where now it take 10x the paper money to buy those goods.

Sprott was buying gold at $400 thereabouts.  He's up huge and everything he wants to buy is 35% of its former price in doelars.

Sat, 01/30/2010 - 22:12 | Link to Comment mouser98
mouser98's picture

i will give you 230 trillion Weimar marks for one ounce of gold

Sun, 01/31/2010 - 03:29 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

No thanks.

Sat, 01/30/2010 - 23:23 | Link to Comment dogbreath
dogbreath's picture

By the time gold ever gets to 6 or 10,000, many other event will have occured that will push it there.

some of these already occurred in the 90's and for those early gold bugs they are up 400% plus they probably did not see their portfolios get hit as hard as the sheeple. 

In a nutshell though.  When all faith in paper assets, bonds, or currency is lost the only thing that will have value are tangible goods.  Gold is the king of tangible goods.   patent protection on Windows vista won't mean much either.  Gold will get bubblishous at some point and who knows how high it will go.  All goods and services will revalue themselves in gold/silver or pounds of potatoes.  There will be a market that accomplishes this or there will be tyranny of the bolshevik kind. 

Many with nothing to trade might welome the empty promises of the statist bolshiveks.  Gold at this point will save your life, or maybe not. 

The Gulag Archipelago by A. Solzhenitsyn is enlightening reading to understand the bolshie bit.

Sun, 01/31/2010 - 09:58 | Link to Comment ToNYC
ToNYC's picture

Redemption songs..not just Bob Marley. If a kilo of pure heroin floated by your boat and you got out your net, the fact that it was worth millions on the street would matter very little.

Mon, 02/01/2010 - 08:14 | Link to Comment Observer
Observer's picture

safety is actually perceived safety. it's all subject to sudden change

Sat, 01/30/2010 - 17:34 | Link to Comment Anonymous
Sat, 01/30/2010 - 23:32 | Link to Comment dogbreath
dogbreath's picture

John Embry from Sprott was The Royal Bank (of canada)'s PM mutual fund manager.  While he managed RBC's PM mutual it it did extraordinarilly well and I think it was up 86% in 2002.  Embry was a bit too outspoken for RBC and Eric Sprott gave him a job.   Sprott bought up all excess production capacity at the Roal Canadian Mint.  Before the rush Sprott converted his own 400oz bars into maples which he sells today.

put your money where your mouth is.....................................

Sun, 01/31/2010 - 02:40 | Link to Comment Anonymous
Sun, 01/31/2010 - 08:28 | Link to Comment dogbreath
dogbreath's picture

Didn't know there was a book.  Eric Sprott as another poster said is one of the most successful money managers ever.  He has been ahead of the herd/curve consistantly especially in regard to PM's. 

I have been  dissapointed by many analysts  Eric is not one of them.  He has put his money where his mouth is.

Sun, 01/31/2010 - 12:33 | Link to Comment Anonymous
Sun, 01/31/2010 - 23:23 | Link to Comment dogbreath
dogbreath's picture

OK.  Benefit of the doubt.

Sun, 01/31/2010 - 03:04 | Link to Comment Anonymous
Sun, 01/31/2010 - 14:44 | Link to Comment dogbreath
dogbreath's picture

I couldn't tell anybody about gold back in 2002.  Nobody was listening.  I would tell them I hope I am wrong.  For your sake I hope you are right. 

 

Sun, 01/31/2010 - 12:39 | Link to Comment Anonymous
Sun, 01/31/2010 - 23:32 | Link to Comment dogbreath
dogbreath's picture

He would but he isn't a mere individual like us, he lives in the public domain seeking clients to whom to sell his ideas. 

 

Is he another GLD selling at the tops to suppress prices.  Hmnn...........

Wouldn't be the first time but his motive might not be to sell at the top but to sell at a technically weak point to drive the price down like GLD whereby the shorts can clean up.

 

Nothing is that simple anymore as  to think the Top is in. The game is much more sophisticated.  Psyops is more like it.

Sun, 01/31/2010 - 02:39 | Link to Comment Anonymous
Sun, 01/31/2010 - 03:18 | Link to Comment Anonymous
Sat, 01/30/2010 - 17:35 | Link to Comment wang
wang's picture

SPROTT GOLD AND PRECIOUS MINERALS FUND
Portfolio Managers Charles Oliver & Jamie Horvat
Assets Under Management $522 Million

PERFORMANCE REVIEW - COMPOUND

5 yr. 10.3%

3 yr. (-3.4%)

1 yr. 113.8%

http://www.sprott.com/Docs/Performance/gold.pdf

Sat, 01/30/2010 - 17:35 | Link to Comment hettygreen
hettygreen's picture

At the risk of ruffling a few feathers, Sprott may be correct about gold but I find his absolute, almost religious certainty about its future just a tad disturbing. And all those potential gold acolytes who know little or nothing about the metal and its "historic bull market" sound a lot like the tech "investors" of ten years ago who never met an internet or fibre optic story they didn't like (or a balance sheet they should bother to read).

I like the idea of gold as portfolio insurance or a tradeable speculation but not as a road to riches investment. Gold as money? Sounds great but without a way-back machine to the nineteenth century or worldwide abolishment of existing fiat, I have my doubts.

Sat, 01/30/2010 - 17:37 | Link to Comment Anonymous
Sat, 01/30/2010 - 23:36 | Link to Comment dogbreath
dogbreath's picture

who the fuck is geoge soros or maybe what the fuck is he.  One thing for sure georgie boy is not interested in anybody but old #1. 

Sat, 01/30/2010 - 17:44 | Link to Comment mkkby
mkkby's picture

America is a debtor nation.  If the currency is devalued, banks get killed and regular people get a windfall.  Do you think the powers that be want that?  I thought you all believed the Fed was owned and operated so the banks can rule the world.  You can't have it both ways.

If you believe the currency is doomed, go ahead and buy gold.  But you'd be much better off getting the largest mortgage you can.

Sat, 01/30/2010 - 18:10 | Link to Comment Anonymous
Sun, 01/31/2010 - 00:16 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

I would keep some cash with the gold, the more the better of each.

Sat, 01/30/2010 - 19:09 | Link to Comment boiow
boiow's picture

tptb dont want 'banks' to rule the world . they want 'a bank' to rule the world. one of the ways they hope to achieve that is to create mayhem in the currency markets, nationally and internationally so people demand 'that something is done about it'. then they make their grand entrance. (they are merely waiting in the wings at the moment but are seen by many)

Sat, 01/30/2010 - 21:22 | Link to Comment Molon Labe
Molon Labe's picture

Why?  That entails much more risk than simply buying and holding some gold.  Anyone who goes all in based solely on an inflationary or deflationary $ scenario at the moment is foolish, in my opinion.  There are too many levers being pulled.

Sat, 01/30/2010 - 21:40 | Link to Comment dumpster
dumpster's picture

getting the largest mortgage you can

 

go ask those guys that bought a 900,000 home with nothing down,, how that idea works,, specially with out a job. ,service the chain around your leg    

 

the logic is flawed,,, as if inflation goes off the map gold will keep going up.. homes are in for a long down trend into 2030.

buy the gold .. use the gold to buy the house when the time is right.

 

a    ill  logical spin based on emotion. sure get a house paid and free and clear is best.

 

 

Sun, 01/31/2010 - 08:31 | Link to Comment Doug
Doug's picture

You are missing his point.  You need to read up on the effects of hyperinflation on debts.  His point is that inflation will render the mortgage debt inconsequential over time; meanwhile, in the end, you will have a truly valuable asset.  The bigger the mortgage, the better the ultimate asset.  Gold is not something you can live in. 

Sun, 01/31/2010 - 10:08 | Link to Comment ToNYC
ToNYC's picture

Is cashflow an issue that you consider in maxing out your mortgage vs investing in your own tools to build wealth, or is this paper-trading?

Sat, 01/30/2010 - 23:41 | Link to Comment dogbreath
dogbreath's picture

"you'd be much better off getting the largest mortgage you can."

 

.............er, and do what. 

 

You:  "Excuse me Mr banker but i would like to take out a monster mortgage on a House."

Mr banker:   " AH HAHAHAHAHAHAHAHAHAHA...............................

Sun, 01/31/2010 - 08:04 | Link to Comment 1984
1984's picture

"If the currency is devalued, banks get killed and regular people get a windfall.  Do you think the powers that be want that?"

The answer is YES, for the simple reason that the debtors can walk away from the debt if the burden gets to be too much and the banks get nothing.  So it's in their interest to devalue, but just enough to keep the slaves from quitting.

Sun, 01/31/2010 - 23:37 | Link to Comment dogbreath
dogbreath's picture

1984:

 

Anybody who signed the line and sold their soul to the devil still has an obligation.  The failure of the lender doesn't mean the obligation is void.  Someone else will pick up the paper to your house for 10 cents.  You will still owe.  No?

 

 

Sat, 01/30/2010 - 17:53 | Link to Comment Anonymous
Sat, 01/30/2010 - 21:45 | Link to Comment dumpster
dumpster's picture

There is a significant tax disadvantage to holding gold, no matter whether it holds up as a store of value.

 

75% of something much better than.. a capitol loss .. at 3000 a year write off..

 

and selling a gold coin or 6.   at the local coin shop .. is just exchanging dollars .if you want to pay the tax be the guest of life lol

 

Sun, 01/31/2010 - 00:33 | Link to Comment dogbreath
dogbreath's picture

Who's holding gold...... what gold??

Sat, 01/30/2010 - 18:03 | Link to Comment wang
wang's picture

From the archives (April 7 2009: A one hour roundtable with Sprott, Roubini, Meredith and Gordon on BNN - video)

Part 1

Part 2

Part 3

 

and Sprott from July 2009

http://www.youtube.com/watch?v=3V-_0qAjRzQ

Sat, 01/30/2010 - 18:09 | Link to Comment Anonymous
Sat, 01/30/2010 - 19:00 | Link to Comment boiow
boiow's picture

there are stacks of currencies that are worth nothing (zimbabwe weimar etc, etc). but gold has never and will never be worth nothing.

Sat, 01/30/2010 - 21:08 | Link to Comment Anonymous
Sat, 01/30/2010 - 21:28 | Link to Comment Molon Labe
Molon Labe's picture

I paid a few dollars on ebay for some zimbucks.  Ten, Fifty and One Hundred Trillion denominations.  Nothing illustrates a point like an artifact.

Sun, 01/31/2010 - 10:13 | Link to Comment ToNYC
ToNYC's picture

Only Nothing is Nothing. Everything else is Something. There is nothing new under the Sun (outside of particle physics which happens on the Sun); which the only free lunch on the planet.

Sat, 01/30/2010 - 18:12 | Link to Comment umop episdn
umop episdn's picture

Whodathunk that this article would be such potent troll bait.

Sat, 01/30/2010 - 19:02 | Link to Comment Anonymous
Sat, 01/30/2010 - 21:46 | Link to Comment dumpster
dumpster's picture

trolled you in lol

Sat, 01/30/2010 - 18:22 | Link to Comment pros
pros's picture

nonsense....

 

people have used seashells, beaver pelts and dill seeds as money, too--go try to pump those prices up-

gold is a commodity---there's no mystery there despite best efforts of the crazies.

Sat, 01/30/2010 - 18:40 | Link to Comment Anonymous
Sat, 01/30/2010 - 22:58 | Link to Comment Anonymous
Sat, 01/30/2010 - 20:51 | Link to Comment Blindweb
Blindweb's picture

Dollars are commodities.

Personally I think an ounce of gold is at least 6k times as useful as FRNs

Sat, 01/30/2010 - 21:35 | Link to Comment Anonymous
Sat, 01/30/2010 - 23:52 | Link to Comment dogbreath
dogbreath's picture

seashells are a fiat currency.  At least you can rub your beaver with a beaver pelt and make it happy and warm. Dill seeds will grow a fine herb unlike.  seashells are good for mostly sweet FA.  

 

Sat, 01/30/2010 - 18:32 | Link to Comment boiow
boiow's picture

the trouble is people have used fiat currency for so long that they think its money.

when paper currency is just a flirtatious memory of the real money that it represented.

so, the real choice is, do we get led like sheep into the new global fiat currency controlled by a central bank.  or, do we buy as much gold ,silver, etc as we can and set up our own trading arrangements when tshtf , for the next leg down.

Sat, 01/30/2010 - 18:58 | Link to Comment master_of_puppets
master_of_puppets's picture

sh*t, i hope so.  my gold mutual fund has taken some lumps lately!

Sat, 01/30/2010 - 19:13 | Link to Comment Anonymous
Sun, 01/31/2010 - 10:21 | Link to Comment ToNYC
ToNYC's picture

Hopefully is not a trading strategy. Buy $100 OTM puts to CYA.

Sat, 01/30/2010 - 19:25 | Link to Comment jimmyjames
jimmyjames's picture
by Anonymous
on Sat, 01/30/2010 - 15:25
#212038

 

What I'm struggling with is who the hell is going to buy the stuff once it hits $6K or $10k per ounce? I thought my house would never go down in value - hard asset, limited supply, growing population, limited land, bla bla bla.

******************************

Yes--Gold will become too expensive for most people to buy and that,as a poster earlier said,will be when Silver shines--

Sprott i think misses the end picture as well--

The buyers of gold-will be central banks,as they rush into the market and bid up the price,as they buy in a panic--in order to stop a flight out of paper,by people that eventually clue in--

Taking gold weighting out of paper currency's weakened them--

No question about that--

Gold will be,what eventually strengthens and saves them--

 

Sat, 01/30/2010 - 19:26 | Link to Comment Anonymous
Sun, 01/31/2010 - 08:20 | Link to Comment Anonymous
Sun, 01/31/2010 - 09:01 | Link to Comment jimmyjames
jimmyjames's picture

 

by Anonymous
on Sat, 01/30/2010 - 17:26
#212088

But from a risk-reward perspective, it's dumb money.

************************************

Anon--have you bothered to look at a gold cart over the last 10 years?

What was the risk?

More to your statement--What was the reward?

A three bagger--nothing dumb about that--

What is dumb--is saying gold is a risk--

HF--some will just never get it--

Sun, 01/31/2010 - 11:51 | Link to Comment Anonymous
Sun, 01/31/2010 - 16:42 | Link to Comment jimmyjames
jimmyjames's picture

by Anonymous
on Sat, 01/30/2010 - 17:26

#21208

JJ, you can't be serious. Is this the best you've got? Then you are either dumb money personified or even worse a gold pusher who will lead the lambs to slaughter.

So going by what you wrote above, we should have all bought the Nasdaq in 2000 right? Yeah, that's smart.

Remember: It's BUY LOW SELL HIGH, not buy high sell low.

Reread my post: I didn't say gold was always dumb money. I said it is now dumb money. And I would say that about any investment at historic highs.

***********************************

Well i read thru your shit drivel--again--

Not sure why i bothered--

Your calling the end of a 10 year bull market?

Let's see some data/charts that points that out--

And this really lame--

 

"The proper use of Gold is for insurance. The improper use of gold is to speculate and treat it as an "investment." When school teachers, mailmen and housewives are buying gold at historically high prices and placing bets that it will continue to go to $5000, then you know the train has already left the station. Gold may very will continue to go up because nobody can predict how long bubbles will last. But from a risk-reward perspective, it's dumb money."

 

So--on one hand it's insurance and on the other it's risk--

huh?

 

Sun, 01/31/2010 - 18:49 | Link to Comment Anonymous
Sun, 01/31/2010 - 21:48 | Link to Comment jimmyjames
jimmyjames's picture

Anon--

Point out--where i said "buy"

I asked you to prove--with a chart that this bull was over--

Don't worry--I don't expect one--because the data doesn't exist--

All we see once again--is your lame brained hype--

Sun, 01/31/2010 - 23:09 | Link to Comment Anonymous
Mon, 02/01/2010 - 00:35 | Link to Comment jimmyjames
jimmyjames's picture

Anon--

i think you don't know what your saying--

First gold is in a bubble--says you--

Then you say a triple in 10 years is nothing--

So which is it?

btw--i'm done with you--changing your tune every post--

got it?

Sun, 01/31/2010 - 18:13 | Link to Comment Anonymous
Sat, 01/30/2010 - 19:30 | Link to Comment Anonymous
Sun, 01/31/2010 - 19:58 | Link to Comment boiow
boiow's picture

absofuckinglutely.  +10

Sat, 01/30/2010 - 19:31 | Link to Comment perchprism
perchprism's picture

 

When I bought my silver and gold it was with the idea that it might some day buy the same goods and services as it would in the mid-nineteenth century, when an ounce of gold ($20) would buy a decent plow horse.  It was worth 20 oz of silver.  A decent wage was $20 a month and found.  With that in mind, I've got a couple year's worth.

If TSHTF, all bets are off for the first year or two, to allow for contraction of the population, so it's important to have all necessities taken care of for at least that long.  In the meantime, if it does get up to $6,000/oz, I might sell enough to pay off the mortgage, just so I'll have it free and clear.

Sat, 01/30/2010 - 19:37 | Link to Comment jimmyjames
jimmyjames's picture

I should have added--

Central banks will be competing with the squeezed shorts-ie-commercial banks--

Sat, 01/30/2010 - 22:33 | Link to Comment Anonymous
Sun, 01/31/2010 - 00:44 | Link to Comment dogbreath
dogbreath's picture

Anon 212233,

 

I've been wondering about the property tax thing.  Could you put a number on the 250% property tax increase.  

regards 

Sun, 01/31/2010 - 04:08 | Link to Comment Anonymous
Sun, 01/31/2010 - 21:39 | Link to Comment cougar_w
cougar_w's picture

When someone here says "when the SHTF" they usually mean a run on the bank, bank holiday, martial law, stuff like that. Life could go on for most under those conditions.

The real shit hitting the real fan is socio-economic collapse. Nobody goes forward.

Nobody is really talking about that.

cougar

 

Sat, 01/30/2010 - 19:36 | Link to Comment Master Bates
Master Bates's picture

Nah, gold is different than every other Asset bubble, because a guy who wants to sell you gold funds says so.

You don't have to worry about gold crashing like every other asset bubble crashing, because gold is different.  It's a store of value, instead of a tangible commodity that people actually need.

If you would have bought gold in ancient Rome, it'd still be worth 1000 an ounce today!  If you bought gold a month ago, you got scammed.

Gold to 6000 an ounce bitchez!  Yeah boyee!  I is gunna by me sum gold wright now!

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