John Embry: "Gold, Silver Could Go Ballistic By Year End"

Tyler Durden's picture

Sprott's John Embry is in fine form today: in a just released oped in the Investor's Digest of Canada, the Chief Investment Strategist of Sprott Asset Management LP, and one of the biggest fans of shiny metals in history, makes the following bold prediction, which also explains how he views the concerted attempts by the LBMA to keep gold below the $1,420 all time high: "I am not in the least bit concerned about these shenanigans because I
believe considerable additional quantitative easing is inevitable,
irrespective of what the Fed says or does in the short term. Goldman
Sachs's chief U.S. economist Jan Hatzius clearly shares my view as he
has suggested that ultimately as much as $4 trillion maybe required
although he anticipates that it will be staged. In my opinion this will
act as catnip for gold and silver prices, which could go ballistic by
year-end." Presumably, he means 2011. So forget all you have heard about interest rate (real or otherwise) correlations: they don't exist. All that does exist is the willingness of the Fed to 'print.' And with China increasingly starting to tighten, the Fed will need to do double duty if it wishes to keep global liquidity well-offered with near-free fiat paper. While we don't quite share Embry's enthusiasm for gold's imminent escape velocity, we are confident that as long as loose monetary policy is the only means to extend and pretend the ponzi, gold will, in turn, be well-bid.

"Gold, Silver Could Go Ballistic By Year End" published in Investor's Digest of Canada

The gold price experienced a virtually uninterrupted rise of more than $200 in a 2 1/2 month period from the end of July through mid-October.  This came on the heels of an orchestrated $100 price takedown following an all-time price high in mid-June as the authorities took great pains at that time to ensure that the gold price wasn't flying as the necessity for further quantitative easing (QE) became obvious.

Not surprisingly, we saw a replay of this mindset in late October as the gold price came under renewed attack in the aftermath of a large buildup in Comex open interest during the aforementioned price rise. With the U.S. elections and an important Federal Open Market Committee meeting (where another massive QE operation was expected to be announced) in the offing, the U.S. powers-that-be wanted to make sure that the gold price wasn't surging to new highs.

I am not in the least bit concerned about these shenanigans because I believe considerable additional quantitative easing is inevitable, irrespective of what the Fed says or does in the short term. Goldman Sachs's chief U.S. economist Jan Hatzius clearly shares my view as he has suggested that ultimately as much as $4 trillion maybe required although he anticipates that it will be staged. In my opinion this will act as catnip for gold and silver prices, which could go ballistic by year-end.

What is really at issue here is the fate of the U.S. dollar. Aggressive QE will steadily undermine the relative value of the U.S. dollar, and the rest ofthe world is already unhap¬py, to put it mildly, with the U.S.'s cavalier attitude about the value of the dollar.

However, in an environment where unemployment remains intractable despite massive government deficits and rock bottom interest rates, the U.S. is running out of policy options to revive its flagging economy, and cheapening their currency to enhance ex¬ports is obviously the latest ploy.

In my opinion, quantitative easing is actually a horrible policy, which, pursued aggressively enough, will inevitably lead to a collapsing currency, rapidly mounting inflation and considerable social unrest. There is no ex¬ample in economic history where following this course of action has led to a positive outcome.

Nevertheless, it appears that Fed Chairman Ben Bernanke and his cohorts seem determined to follow this path and I expect that it will have a very salutary effect on the price of all hard assets but, most particularly, the monetary ones, gold and silver.

I find it beyond remarkable that U.S. Treasury Secretary Timothy Geithner can say with a straight face that the U.S. would not devalue the dollar for export advantage. He did exactly that in a speech to Silicon Valley business leaders just before an important meeting of the finance ministers of the G20 countries in Seoul, South Korea, in late October. I would suggest that this represents another classic example of making sure you pay attention to what people do rather than what they say. Geithner's obvious mendacity probably also contributed mightily to the essential failure of the Seoul conclave to arrive at any substantive answers on the subject of the intensifying currency wars.

The incessant top callers in the gold and silver markets have changed their tune somewhat and, instead of hammering away at the ridiculous gold bubble thesis, have focused recently on the technical angle that gold and silver are overbought and therefore subject to a serious correction. My rejoinder to that, irrespective of whether they are overbought or not, is to ask the simple question, "Why should they correct significantly?"

The fundamentals remain impeccable. The U.S. Federal Reserve is going to print staggering quantities of money as a matter of necessity. "Foreclosuregate" is breaking wide open, imperiling hundred of billions of dollars worth of mortgage-backed collateralized obligations, thus putting the originating banks in a particularly precarious position. I don't think it is any accident that bank stocks underperformed noticeably in the recent U.S. stock market rise.

Debt is continuing to proliferate in many parts of the world as an evermore frenetic attempt is made to keep the world economy moving forward. The ultimate outcome is increasingly tilting towards massive competitive currency debasement worldwide and eventual hyperinflation.

In fact,! believe it is becoming more dangerous by the day to trade your gold and silver positions at the present time. If you are a believer and share my view that we are heading for very large trouble in the near future, the worst possible outcome would be to be out of gold and silver in a trade at the very moment the crisis arrives. Repositioning would be psychologically difficult, and in a time of rapidly shrinking stocks of physical gold and silver, could prove challenging.

My formula

My formula for this entire bull market, which has now spanned 10 years, has been to increase exposure on every correction. Investors should not be focused on the dollar value of the gold and silver that they own but rather on the number of ounces that they possess. Gold and silver represent real money, time tested for centuries, while every pure fiat-currency system has ended in ruins.

Thus I find some commentary on this subject from two American investment icons to be very disturbing. Warren Buffett's business partner Charles Munger recently said the following in a speech at the University of Michigan.

"I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me, that's not optional; that's a moral obligation. If you understand the world, you have a moral obligation to become rational and I don't see how you become rational hoarding gold. Even if it works, you're a jerk." [And this from the hypocrite telling all those hundreds of millions who unlike Berkshire, did not have direct monetary recourse to the Fed's bailouts, and whom Munger advised to "suck it up."]

These certainly don't sound like the words of a rational man. In fact, they more closely resemble those of a petulant child. Mr. Munger may like to understand what works but, in the current instance, he clearly hasn't applied his considerable intellect to the fatal flaws in the existing world monetary system and the need to protect oneself from its inevitable dissolution.

Mr. Buffett, himself, then offered his opinion in an interview with Ben Stein :"You could take all the gold that's ever been mined and it would fill a cube 67 feet in each direction. For what that's worth in current gold prices, you could buy all— not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which is going to produce more value?"

In my opinion, this is sophistry of the worst sort. I have no objection to Mr. Buffett's endorsement of farmland and stocks like Exxon Mobil. They represent ideal investments in the world I see unfolding. Unfortunately, there are tens of trillions worth of paper money out there and more is being created everyday and, unfortunately, there are a very finite number of hard assets of the type cited by Mr. Buffett available for purchase.

Thus, it comes down to where the population as a whole should collectively hold the remainder of its net worth. Is the choice financial assets (bonds, bank deposits, etc.), the purchasing power of which is fated to be destroyed by inflation, or an eternal monetary asset like gold which has retained its purchasing power for centuries. With all due respect to Warren Buffett, I have absolutely no question as to what my choice would be.

Warren's father

Perhaps Mr. Buffett and his partner Munger should have paid more attention to the wisdom of Howard Buffett, a U.S. Congress¬man from Nebraska in the period immediately following the Second World War and a man who just happens to be Warren's father. The senior Buffett stated succinctly in an essay he wrote in that era that "human freedom rests on gold redeemable money" and that "paper money systems generally collapse and result in economic chaos." He was clearly a far-sighted individual. [TD: for our take on Howard Buffett's view on gold, read here].

To conclude, I expect that gold will be comfortably in new high territory by year-end and that silver will be well on its way to eclipsing the 1980 high of more than $50 per ounce, achieved at a time when the Hunt brothers were trying to corner the market. It most certainly won't be a smooth ride because considerable volatility is a given, but in the fullness of time, I suspect it will be very financially rewarding.

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Malcolm Tucker's picture

Of course Gold and Silver will go ballistic. Not only is fiat money being devalued, it's also insecure:

A must read if you have a "chip and pin" type card.


Temporalist's picture

What?!?!?!  Banksters commit fraud on clients and try to legalese their way out of it?  Never!!!

lawrence1's picture

Bravo for Cambridge!
Apparently not like the corporate cock-suckers that most US universities have become. A bank has just lost a $ 2,000 money wire I initiated and refuse to take responsibility. Any suggestions how to proceed against them would be greatly appreciated.

Fred Hayek's picture

I've never had any such experience (yet), luckily.  But my first instinct would be to threaten them with publicity.  What's the name of a prominent reporter at whatever is the biggest newspaper in your area?  Better still if the guy's done some investigative work. Use his name whether you actually know him (unlikely) or not.  You don't owe them honesty in how you have to negotiate them to behaving reasonably.

"You know, I know David X who writes for the Chronicle.  Maybe he's working on a story about how banks are mistreating customers and could use some information.  Would you like me to go ahead and call him or would you like to behave honorably here?"

lawrence1's picture

Thanks, I may well do that. I'm very dubious about legal possibilities but I'm going to see a few attorneys who offer free initial consultations. Am leary about throwing good money after bad.
Again, thanks for your response.

Nostradumbass's picture


Using publicity is almost always a great avenue for pressuring self-serving institutions behaving badly towards The People. Even the MSM is still useful in this regard at least.

Another avenue is your local federal/state representative. Once, I was unwilling to have a social security number assigned to my young daughter even though the IRS would not process my tax forms without it. I simply forwarded the communications and forms to my federal congressman and in a couple of weeks my refund was in hand. I like to tell people that my congressman was my tax man.

Double.Eagle.Gold's picture

"just lost a $2,000 money wire..."

Use your head Sir, start by requesting physical copies of records showing the transfer and confirmation of same by receiving bank. Then contact the receiving Bank, do the same.

Once you have these documents, contact the Secret Service, oddly enough Bank issues like this is their second area of responsibility.

Caviar Emptor's picture

Fed's got a lot of dirty little secrets to hide, and banks + Wall Street + corporate America have lots of dirty laundry to wash which ensures we'll have ultra low rates and more QE. This is not the end, this is not beginning of the end, but perhaps the end of the beginning. 

DoChenRollingBearing's picture

+ $1385

Very Churchillian.  Guys like you, Caviar, should be running things, not the clowns we have had for years, decades...

brushfire's picture

End of the beginning indeed. Rest assured, BIG inflation is coming our way and despite Bernanke's "100%" remark, we will not adequately contain it. If you still believe in deflation, I strongly suggest you pick up a copy of "Dying of Money." Its an expensive book, but it is worth it's weight in...well you know. Equilibrium Price=velocity*money supply/supply of real goods. Velocity ALWAYS lags money supply, but it ALWAYS rises to establish a new equilibrium.

DavidPierre's picture

The status quo of the USSA will change permanently in 2011, and only those who have PROTECTED THEMSELVES will be ready for the very difficult transition to the next paradigm of America’s existence, which, among other things, will include a new currency (the dollar will be wiped out) that is backed by much, much higher priced gold and silver.

Viva GATA!

Armchair Bear's picture

Bix Weir suggests $6000 silver - based on it being five times more rare above ground, and an essential industrial metal - if that's the case, I'll be a millionaire several times over!

Miramanee's picture

or in the very least you could open a successful dentistry practice.

Metropolis_Minx's picture

Armchair, I've only recently found Bix Weir, but find his concepts/philosophy intriguing. The idea that Greenspan, Bernanke, and a click of others are working to bring down the world-wide banking cabal might not be too far-fetched when one looks at their formative years (Greenspan's devotion to Ayn Rand and John Locke). And Boston Fed's The Ledger publication of "The Road to Roota" has me making correlations to Baum's allegory of the Gold standard in his Oz book and the docu-film "The Secret of Oz". Very interesting stuff indeedy.

I mean, really... Can you imagine being saved from fiat slavery from a few infiltrators in the freakin' Federal Reserve? Too bizarre...

zero-g's picture

Hadn't heard of Road to Roota, but it looks interesting, I will check it out more.

It seems farfetched though that alot of these hardcore Secret Society guys have developed a conscience.

zero-g's picture

I was doing some more reading from his site, and he tries to make the case that Bill Gates and Warren Buffet might be two 'good guys'. Anyone who has looked into what the Bill and Milenda Gates foundation is really for would know otherwise.

While he has a good story, it just seems too good to be true, overlooking some key facts. Bill and Warren moving from being NWO depopulation supporters to help out people out of good will, right....

living on the edge's picture

Unless you have your assets outside of the financial system at the very least a haircut is coming your way. Gold and silver will prove to be the best vehicles to maintain that independence from the financial fraudsters.

huggy_in_london's picture

well.. he's long, and with china tightening he's going to suffer some pain on the open isn't he... better pimp that position.  

Saxxon's picture

+1 huggy baby some pain coming but not for long.

brushfire's picture China tightened over the weekend and this piece is over a week old. Wouldn't bet against Embry right now given his record and the fundos re: the metals.

Turd Ferguson's picture

Yah, I'm not sure how we got it early but I had it last week.

Regardless, very interesting stuff. Especially when you consider John's track record.

Read this, too. I posted it on my site last week as a reminder:

Note the date of 7/23/10. When it was released, gold was three days away from its last corrective bottom. Not very many enthusiastic bulls around late last July.

Spalding_Smailes's picture




Gold Rates, Gold Ounce Price Today 10/20/10 - October 20 2010


........"The current price of an ounce of gold was negative during the day today in the New York market, to suffer the biggest drop since July, the cause, actions taken by the Government of China to raise the basic interest increasing interest in investing in the dollar.".....

Twindrives's picture

Bring it on.  The corrupt U.S. administration is wounded by it's continual violation of the U.S. Constitution and the resulant anger of citizens.  The banking system is failing....... and eventually to fall.  I'll savor the news of the Fed's dollar failure with some fine Canadian whiskey.   Burn in hell Bennie boy.  

DoChenRollingBearing's picture

NONE of our financial problems has been solved.

NO ONE (of significance) of the lot that brought us here is in jail.

ANYONE who can afford gold who does not have any has not been thinking, or does not own a functioning brain.

the rookie cynic's picture

1999 quote from Greenspan: "In extremis fiat money is accepted by nobody and gold is always accepted and is the ultimate means of payment…"

US holds 78% of its capital reserves, not as fiat paper (like yen, euros, sterling etc.), but as gold. Guess Uncle Sam is a silly goldbug.

I'd rather not buy gold, but what choice do the money printers, deficit spenders, and Wall Street crooks leave me with?



living on the edge's picture

US holds 78% of its capital reserves, not as fiat paper (like yen, euros, sterling etc.), but as gold.

I really don't believe the above statement for a minute. The US sold all or a large portion of their gold long ago. Sad to say.

Non Passaran's picture

By extension those foreigners who hold the dollar actually hold a gold-backed currency. That would mean they aren't any worse off than the US government. Hmmm...

Al Gorerhythm's picture

The USA hasn't any capital in reserve. It has $14 Trillion dollars of debt and a further 100 T in liabilities that it must pay. And just where are these audited reserves held, pray tell.

Reserves! Phtttt.

If you'd rather not buy gold (Huunnhhh?), then go get yourself a pair of boxing dloves, lace up and give yourself an uppercut. You never know, it might knock you conscious.

umop episdn's picture

'Ethically challenged' folks running the Untied State of Merka...check

Economy in handbasket on trip to warm place...check

Central bank openly printing money (WTF)...check

I'm all out of hopium...check

jimgcpa's picture

Can't think of a more overhyped investment than Gold.  Buy Buy Buy Buy...even Cramer says Buy.  LMFAO!!!!


DoChenRollingBearing's picture

The Bearing did not junk you (knowing full well that there ARE junky bearings out there), but does have a suggestion:

Buy umop's above mentioned Hopium, you will probably need it.

XPolemic's picture

Gold (and silver) is not an investment, it's a hedge. A hedge against incompetence and stupidity.

This Christmas I gave all the adults 100 Trillion Dollars. Yes, you read that correctly, 100 TRILLION Dollars. Zimbabwe dollars that is. Issued by the Reserve Bank of Zimbabwe no less.

The children I gave silver coins. The 100 Trillion Dollar note may become a collector's item (or not), and the market price for silver may go down (or probably not).

The 100 Trillion Dollar notes represent incompetence and stupidity, and the silver coins a hedge against same. Which side of the hedge do you want to be on?

Personally I never bet against stupidity, as it is almost always a certain bet.

JonNadler's picture

OK, Jimgcpa is not one of my screen  names, it's remotely possible that he's legitimate.


I mean I welcome his anti gold post but it seems very weak though. not much help to me, am afraid 


DoChenRollingBearing's picture

JonNadler, things are moving so fast that I have not been able to find out who you are still with!  Did Jamie keep you on, or did you have to move back to kitco?

If you are still w/ JPM, are you still stuck w/ Blythe...?  Ugh!

Hmm.  Might have a hard time having a Happy New Year!

JonNadler's picture

Hey DoChen

Am everywhere I can shamelessly tell half truths with disengenious logic to scare sheeple away from gold.

Situation bad at JP M, a feeling of doom is in tha air, it's like the bunker in April 1945, with Jamie fantazising about dealing a great blow to the gold bugs, but everyone knowing his losing it, and Blythe is acting like Mrs. Goebbles...if you remember that scene from Downfall...sad...very sad

SilverRhino's picture

Explain to me why I keep seeing "WE BUY GOLD" shops opening EVERYWHERE. 

When I see those places closing down.  Then I'll know that the peak approaches.


thegr8whorebabylon's picture

He. means. 2010.



(I think)  ;)

max2205's picture

Buy the dip works in all assets. Except .... When it doesn't.

MsCreant's picture

Gold waterfalling down

oddjob's picture

oh shit yeah,its getting pounded down nearly 2 bucks.

Non Passaran's picture

Golden shower, so to speak...

DoChenRollingBearing's picture

I read somewhere, long ago, that Adolf Hitler liked his golden showers from Eva...

MsCreant's picture

Wonder if they are shorting the shit out of pms offshore, or if the China rate hikes matter.