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John Embry: "Gold, Silver Could Go Ballistic By Year End"
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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Do you think Embry was talking about 2010 or 2011? This article was originally from 12/19/10 so I think he was talking about a ballistic move before the end of 2010. Thoughts?
The Central Bankers will never allow a "ballistic" move. As long as QE is maintained- buy and accumulate. Just be careful when the music stops. Physical metal may end up being a better strategic purchase than an investment.
2010 - read Harvey Organ's blog. There is 1.0 million oz in Comex and 7.0 million standing for delivery between now and 12/31.
Found Harvey's blog thru SGTbull07 channel on the youtube. There you can find conversations with Harvey, recent convos, if you haven't already discovered SGT.
Since every central bank on earth issues air-backed instead of commodity-backed fiat money, for currencies with roughly the same interest rate curve and the same level of political risk, the realtive FX cross depends on relative rate at which they mutually inflate. Then we throw in currency swaps and equity involvement, all mostly secret.
People fixate on a "collapse" of the dollar when the far bigger swan on the horizon is the collapse of all co-inflating currencies. No wonder traders are increasingly parking their excess cash not in USD or EUR but in PM etfs.
right on. all currencies are in the same mess, no one is really better than another, euro, yen, usd, ...
this time, inflation will again be fueled by excessive liquidity similar to the last time, except that it won't be in the equity market this time. it will be in the pm market.
All you gold bulls: inflation is on its way.
One by one the nations of the globe are succumbing to the insidious force. Tonight in the UK the feeling is that 'the genie is out of the bottle' and a spiral may have begun (See Liam Halligan in The Telegraph). China has raised, again. Other Asian countries will not be far behind, again. As will be other European countries. South America has returned to its inflationary ways. And here in the US we already have inflation masked in the official numbers by an undercurrent of deflation aka decay. I call it 'Biflation'. But the outcome of biflation is just a more intensely destructive version of inflation: Your buying power will be crushed. We called it here this summer before the gold mega-rally began. I've been calling it for over a year.
And we can all thank the tsunami of dollars sloshing around the global economy that have built up for 4 decades. Do you believe the Fed when they tell you not to worry because the money supply has not grown that much?? What about the global dollar supply (not counted) which has been expanding on an hourly basis for over 40 years to fund unsustainable US deficits? And it's happening as we speak. The days of the dollar as unique global reserve currency are numbered.
Only gold can protect your wealth, savings, earnings in today's dollars which will dwindle away in value over time despite interest. Stocks? Would you buy and hold paper from good companies minted in Zimbabwe dollars? It's not a reflection of the quality of the company anymore, but of the money that backs the economy the company happens to be living in. There's a rising probability that the future global reserve currency will be gold-based. That's why Asian and Middle Eastern countries have been relentlessly buying the metal and holding. They're surreptitiously dumping their excess dollar holdings, positioning themselves for a new reserve basket which will be backed by gold.
I can agree with this...one thing I would counsel the bugz to do is to focus on POGs outside of the dollar price.
Most notably, focus on the EUR and BRL POGs. These are your anchor currencies on 2 other continents. The FX cross won't tell the whole story.
Not many years back Buffet held a massive position in Silver. He believed in it then and he had a well thought out reasoning for taking the position, which was gigantic. A decision to take such a large position would have involved Munger, so he must have agreed on taking the position and the reasoning. So now they're both negative?
Then some group of very powerful individuals had a talk with him. Was he threatened? Did he fear for his life and that of everyone he cares about? Could he be blackmailed? Was it a threat to destroy Berkshire (that's my guess) Who knows.
But he closed out the position to a large degree and has not spoken about what was said.
"Was he threatened?"
Not a flame, but do you really think that was a possibility?
Do we really live in that sort of world?
Let me know.
I make no distinction between an American CEO of a TBTF and any other mob boss. I think they are way worse. They have legitimacy in the eyes of the culture so they can get away with more before they are finally challenged (if ever). They buy government officials (through the lobby process), get rules made in their favor, have the best lawyers, I could go on...
Supposedly he got into some serious trouble over issues with AIG and liquidated his Ag position to make it go away. Funny how it is supposedly JPM that also picked up his silver position.
Gold vs. Silver, which is the better investment? CNBC put the two precious metals in a boxing ring, in the form of James Turk, chairman and founder of Goldmoney and Charlie Morris, head of absolute return at HSBC Global Asset Management (UK), to find out
http://www.cnbc.com/id/15840232/?video=1625224953&play=1
this is typical christmas week action. price down then up on low volume. this was probably two traders creating artificial action selling to themselves when there were few buyers around. the crackberries started ringing and a few traders woke up. current gold a silver prices could very well be history after this christmas period.
(d)
No offense, but I bet he didn't say by year end OF WHAT YEAR!
I get so tired of forecasts that never come to pass....
A question from my diseased mind:
Could we have hyper-inflation combined with a massive gold/silver SHORT on a scale that we have never seen?
$10 bread due to hyper-inflation, $8 silver (due to massive manipulation)
If the sinister powers that be are so sinister, couldn't they arrange that?
Thanks.
hyper-inflation is a loss in confidence in a currency. can't give your money away fast enough so the answer to your question is No. Hyper inflation means the sinister powers have lost their ability to manipulate. In a hyper inflation tangibles win.
leaving out the hyperinflation - in order to manipulate the price of silver there has to be a clearing house for trading silver whereby the price is accepted with confidence and buyer are guarenteed delivery of their metal. Prior to the hyperinflation this delivery mechanism will break down and there will be a loss in confidence in it. There are reports of problems with delivery yet physical metals are still available in a market of soaring physical demand.
That is what they are supposed to be doing right now. Holding silver down while deliberately inflating the currency.
If you have enough money you can manipulate anything for a while. But eventually you run out of money and BANG. Look what happened to the pound in the seventies and to many other currencies. Their governments rode the gravy train, printing borrowing and spending, until their currency declined in value (for obvious reasons). Then they propped it up by jawboning and buying it back using foreign reserves. Finally they announce they would never, ever, under any circumstance devalue and within a month, devalued. It's the same with every currency scam and in fact, every pyramid scheme eventually collapses or goes parabolic.
you people banging on about inflation need to take a cold shower. Show me where in the US there is inflation. They can print as much money as they like, if its stuck in reserves it ain't gunna do anything to inflation. In the UK, thats a different matter... they'll be putting rates up here soon, or the market will do it for them. But even then, its hardly hyperinflation at sub 4%
are you jokin', Huggy? Inflation is in everything on the grocery store shelf: foods, laundry, etc. My brother jst paid $18 for a gal. of anti-freeze. The beef is that the bullshit CPI numbers are rigged, just like the bullshit BLS work stats are rigged....... Feds do so to make themselves look good and avoid any semblance of panic
hyperinflation is not a currency, but rather a confidence event.
do you think that inflation rate is a lagging indicator?
gosh, man, Robo posted a kitco chart. Look at the bars at the bottom of it. NYMEX is not the only market in the world.
JPM doens't have the political cover to short naked on every exchange, even if they are currently engaged in a price suppression scheme.
Price suppression cannot work indefinitely anyhow. If the futures markets were pricing Ag at $20 and it could not be had IRL for less than $30, all real sellers of it would be charging $30 and buying contracts out the ass at $20 to arb for the cash-settlement. In fact, every HF and idiot on the globe would be doing that.
Remember, they can't print silver.
This was posted elsewhere but certainly worth the time it takes to watch. It is a speech recently done by James Rickards and he approaches the problems in our economy and with the Fed as a scientist. He doesn't appear to have an agenda, he simply interprets the data and draws what he considers reasoned outcomes based on the data. It is extremely difficult to get friends and acquaintances to read this site and other sites like this because they find the topics so distasteful and the speculation about the future so frightful. This video draws a more realistic conclusion than one would draw from most of the postings on this site. I love this site and read nearly every posting. It is just so hard to believe that there isn't a realistic possibility that lies somewhere between today's mess and tomorrows absolute armoggedon. I believe he poses a realistic alternative. http://outerdnn.outer.jhuapl.edu/rethinking/VideoArchives/MrJamesGRickardsPresentationVideo.aspx
Thanks for the link!
so... i hope these guys have a plan for when they want to get out.... that door is going to be awfully skinny. And please don't come back with "they'll hold it forever" type bullshit comments. Everything is a trade and you need an exit plan. The problem with gold is that when it turns you just simply won't be able to liquidate it quick enough. The futures market just isn't deep enough for the accumulated spec positions. It's going to be fun to watch.
ah, the problem with spec and trader types is that they believe all things are cyclical.
Production isn't cyclical, dumbshit. It rises, peaks, then declines. So long as gold production continues to decline - and it is hard to conceive of it rising given the increasing fragmentation of the production source market and continued declines of former major producers - there is a systemic supply/demand bias
thats not the plan. the down cycle that we are in will create opportunities to further concentrate the means of production in fewer hands while the vast majority of sheeple will be saddled with the debts from healthcare to education and bank/ponzi bailouts. didn't your employer tell you this.
fun to watch what. the destruction of the last remaining savings with 100:1 old for new fiat swaps
We should remember that Embry probably gave this interview in late November or early December.