Sprott's John Embry "Gold Is On The Cusp Of A Parabolic Move Up"

Tyler Durden's picture

Today, the FT provided some additional information on the BIS' "goldgate" as relates to its 346 tonnes of gold disclosed as swapped recently by the ubercentral bank. As the FT says, "Investors have bought physical gold in record amounts during the past
two years and deposited it in commercial banks. European financial
institutions are awash with bullion and some are trying to pledge gold
as a guarantee." There was nothing necessarily new in the article, and as expected the swap was merely put in place to collateralize a dollar funding crunch ahead of the European insolvency, allegedly resolved by the guaranteeing of $1 trillion in the world biggest bail out fund by the IMF and the ECB. Nonetheless, at least now we can end speculating as to who benefited: it was not entire countries that had pledged their gold reserves to the ECB (contrary to the rumor that Portugal had given Bernanke a lien on its gold), but merely ten banks, of which HSBC, Société Générale and BNP Paribas were the biggest. While HSBC's presence is somewhat surprising, the latter two banks having found themselves in a massive currency crunch makes sense: as Zero Hedge had previously noted, this is confirmation that it was precisely the French banks that had found themselves on the wrong side of some major euro trades (one need only to recall BNP's call for subparity in the EURUSD from a month ago). Yet what is without doubt is that physical gold will play an increasingly prominent role as a hard collateral asset. In light of this, we present to you the thoughts of Sprott's John Embry on the precious metal, titled "Gold's on the cusp of parabolic move up" whose conclusion fits with the implications of the BIS action: "Central banks can no longer supply the amount needed  to balance supply and demand while mine production continues to stagnate at best. It is imperative that investors ignore the volatility created by the anti-gold cartel and use every opportunity that is created by them to purchase more physical gold." Yes John is conflicted, and yes, he has said comparable things in the past... maybe, as more and more piece of the puzzle come into place, this time he will finally be right?

Full Embry essay

06_23_2010 Gold's on the cusp of a parabolic move up

h/t Kyle

 

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DavidPierre's picture

Is it July 2008 all over again?

In a quick answer, yes and no, only worse in many respects! The economy was on the verge of really tanking back in 2008 as I believe it is again. Same thing with real estate and the banks, however there were no questions back then regarding the health of various sovereign governments.

Now, one can openly question the solvency and financial viability of the U.S. Treasury, Fed and thus the Dollar without having eggs, pies and other garbage thrown at you. I can remember well the bevy of e-mails and calls I received back then chastising me for my "far out" views that the U.S. was on a crash course of bankrupting itself! I welcome debate whether or not this view was not in fact pretty close to the mark.

Yes the big difference between then and now is the health (lack of) of many sovereigns including the U.S.. Don't get me wrong, sovereigns were sick and on the verge of intensive care visits but they have since overdosed on hemlock!

We have gone nearly 2 years with ridiculously low interest rates which in turn is no incentive at all to hold cash. This at a time when stock markets have risen and PE ratios etc. are certainly not cheap and "cash" would normally be a wise choice. I say "normally" but not now because cash in this environment will soon be viewed for what it truly is, namely a liability.

Liability?

Yes a liability of a sovereign government that cannot repay it's debt without the massive printing of more "liabilities" to make payment. How perverse, governments are already "over liabilitied" yet they will be force to issue more!

These sovereigns have and will reach the point where the market place will no longer accept more "liabilities" in the form of bonds so they will be forced to issue more of the "ultimate liability", their currency! It is this realization that ushers in a very fast and very panicky hyperinflation. Hyperinflation will not come upon us like the 70's where goods continually ground their way higher, no, it will come by way of PANIC out of the various currencies and into anything and everything you need to eat, can touch and feel, or use. Hyperinflation will not come from massive "over demand" for anything, it will come about from the massive oversupply of currency and the collapse in demand for these currencies!

So while I believe the deflationary forces that "forced" the hands of many Treasuries and Central Banks will again raise it's ugly head and unravel the system further, the ultimate danger is a breakdown of the entire fiat system.

This WAS a fear back in 2008 but governments still had the ability to borrow more and "guarantee" everything. Now the next logical question will be "who guarantees the government"?

It is this VERY QUESTION when asked on a mass scale that has the ability to set hyperinflation in motion! It is THIS question that when asked has the answer that currencies in today's world are liabilities.

As for now being a good time to have some "cash", I wholeheartedly agree! However it might be a good idea that this "cash" be no one's liability!

Can anyone tell me which currency is no one's liability? Yes, you are correct! Gold and Silver are nobody's liability and in fact are assets!

 Well.....there are some out there (can you say US govt. JPM etc. ) that view Gold as a liability because they either don't have the metal or are actually short the metal but in reality (upon us soon) the only currency on the planet that IS AN ASSET is Gold.

The discovery of this fact by the world is in reality the definition of hyperinflation! 

Bill H. @ LeMet

Tarheel's picture

The last time I heard Gold was going parabolic was when Gartman said it 2 weeks ago and got his ass handed to him

Bay of Pigs's picture

Gartman is a douche on gold. 

J.Caesar's picture

parabolic was also a common phrase 40 years ago; gold for some strange reason attracts the hysterical

Moneygrove's picture

I am happy with my platinum thanks !!!!

DoChenRollingBearing's picture

+ $1550

Diversification in PMs is the smart thing to do.  Yummy, yummy platinum...

B9K9's picture

All economic activity is simply a function of energy. In our present model, energy is represented by oil. Money is nothing more than an abstract measure of economic wealth, so we can state that since oil is the economy, oil is therefore money.

When considering the value of gold, it is wise to evaluate America's strategic military position in critical oil producing regions. Not only obvious places like the ME, but the Americas (Canada, Mexico & Venezuela) & parts of Africa/Asia.

When people willingly short FRNs in favor of gold, they are in essence shorting the US military. Do you really want to make that bet?

If you think our long-term military position is untenable, then by all means buy gold. However, if you think there is more than an even chance the USA will prevail - at least until the marginal cost of supporting such a franchise is greater than the net energy derived (the energy cost of energy) - then it may be wise to stick with the $USD.

Just sayin'.

Internet Tough Guy's picture

I disagree with your premise that long gold is short the military but even if true, I would still take that bet. The military is spread too thin, flung across hundreds of bases. And the military hasn't won a war in 65 years. Betting against the Roman Empire was a losing bet, until it was a winning bet. And then it won big.

B9K9's picture

Like I said, just know who & what you're betting against. It isn't gold vs FRNs, it's really gold vs  DoD/CIA/NSA/Mossad/MI6, etc.

If one thinks the combined western forces occupy (pun intended) an untenable position, then gold should be the preferred medium. If, OTH, one believes that a combination of the world's most brilliant thinkers (ie the Tribe), backed by the world's most bad-ass mofu's (Scots-Irish) to do the actual heavy lifting, then $USD is the best value going.

As to claims that AmeriCo hasn't won a war in 65 years, that is by intention. We learned a hard lession in WWII, which is never willingly chance another depression via peace. Ever since, we have lived in a managed war-time economy.

Our next major war, if it is fought to conclusion, will simply come about as a result of the marginal cost of maintaining steady wars beginning to exceed the energy cost of the net energy derived from our occupations.

The key is to maintain an agnostic perspective about potential outcomes - emotion only means you're dead.

Internet Tough Guy's picture

Your argument for perpetual war to maintain the status quo is right out of 1984. Given this choice we should all root for an Eastasian victory.

I also don't believe your premise that 'the west' is a unified force. The goals of Europe, including their central bankers, are diverging from ours at a rapid rate. Ask the Germans, Greeks, Irish, how much they will suffer to remain a vassal state. I think we already have an answer.

DoChenRollingBearing's picture

You can square the circle here by holding both gold and FRNs.  All smart bearings know that!

Though I lean a bit more to the Tough Guy's view.

...

I did like the comment B9K9's remark about The Tribe and kick-ass Scots-Irish.

 

Bendromeda Strain's picture

The Tribe is boxed in - it happens even to the "smartest" guys. Sometimes you just play for time. Either way, PMs aren't a bet any more than they are an investment. The smart accumulators are merely imitating the power brokers who most certainly are diversifying their holdings. For the small (not necessarily weak) players, it is considered insurance. Squirrel it away and forget about it. Hope you never see it again until you bequeath it on.

Well - you can look at it as you add to it...

KevinB's picture

Given this choice we should all root for an Eastasian victory.

But we're at war with Eurasia. We've always been at war with Eurasia..

Yikes's picture

But going to war is only good if your willing to do mass destruction to industrialized economies so they have to rebuild and buy our stuff do it!

 

We don't fight wars like that anymore.

Internet Tough Guy's picture

After the Soviets went bust, everyone else realized it was stupid to bankrupt yourself to fund a huge military. Now they just build nukes; much cheaper. America still hasn't learned this lesson and has gone bust.

spinone's picture

We have a privitaized, debt based fractional reseve currency.  Once it is debt-saturated, it is broken beyone repair.  And it is.  I will bet against FRN's because TPTB can no longer extract interest payments from the system.  People are defaulting on their loans, and there are fewer and fewer borrowers with collateral.

Exchange some FRN's for gold while you still can.

doggings's picture

tough guys only continue putting their lives on the line while you can pay them.

when the dollar collapses in value so will their interest in dying for "the cause"

so they'll double / treble the military wages (and the Police too to keep the citizenry unter control) - where does that money come from?

print it?  I suggest you study how the Zimbabwe hyperinflation really got going.

you think the US military will save you, which is ironic because it's the very thing that's caused the problems and is finally going to drag you under

JLee2027's picture

The US Military hasn't had to fight a war in 65 years.  All the other stuff has been a skirmish.

 

TrulyStupid's picture

Very expensive, inflation causing, losing skirmishes!

What_Me_Worry's picture

I may be willing to see your point if the supply of each medium were static.  However, all we see is quasi-printing of FRN and dilution of paper gold.  From a baseline percentage from a set date, it would be interesting to see the true movement in actual gold vs. FRN.  However, the data has been so corrupted for so long it would be nearly impossible to make such a comparison anymore.

Pretty much all of us here have to place our chips on one of the two bets in various proportion.  I don't think it unwise to put 25-50% of one's long-term wealth into the gold/silver side of the bet.  If everyone were to even put 10% of their perceived wealth into actual physical wealth then the prices would have to go parabolic from here.

Steaming_Wookie_Doo's picture

True--can I really go out and buy an ounce at 1165? Nope. The premium is outrageous, More like 1195. So gold hasn't gone down much at all in real terms.

What_Me_Worry's picture

Apmex is still $40-$50 over spot on most of their 1 oz coins.

Johnny Bravo's picture

Think of the 'tards that were buying at 1265, and paying probably over 1300.  LOL at them.

DoChenRollingBearing's picture

'tard here bought some at $1240.  Also bought some at $400.  More at $500.  More at $600.  Etc.  I have bought a lot since it went over $1000, so my own cost basis over the decades is not as low as I would have liked (that is, like all my pals here, I would have been real smart had I bought a LOT nearer those lows...).

...

Bravo!  Every d**n day I look at your VXX suggestion over at stockcharts.  One day I may pull the trigger and buy.  But my past track record REALLY BAD as a short-term speculator.

...

Also, Bravo, I had to finally inform the world that you and JonNadler are really Exceutive Vice Presidents over there at JPM.  Someone had to have the balls to do it.

Johnny Bravo's picture

VXX can make a hell of an impact as long as you trade the right way with it.  It could be a kick in the nuts if it goes the wrong way on you though... 
I think it may be a viable trade again very soon though!  (STO appears to be topping in the indices, so we should go lower short term, at least)

And I WISH I was exec VP of JPM!  It sure beats being a lowly student/trader!

merehuman's picture

Bravo, humility will find you and show how you are connected to the soul that you are laughing at. Have you no noble bone in your body?

Spitzer's picture

Hey fuck face, remember the "tards" of the Central bank of India that bought at a previous all time high of 1045 ?

DoChenRollingBearing's picture

@ What_

If everyone put 3% of their wealth in gold it would go parabolic.

Yikes's picture

You know, Rome had a pretty kick ass military too.

TrulyStupid's picture

Until they outsourced war to the barbarian mercenaries!

trav7777's picture

Gold peaked in 2000...therefore it's a good long vs the FRN as it is in supply decline.

Also, the US military has been strong for 40 years..FRN...dowwwwwwwn

SWRichmond's picture

All economic activity is simply a function of energy. In our present model, energy is represented by oil. Money is nothing more than an abstract measure of economic wealth, so we can state that since oil is the economy, oil is therefore money.

When considering the value of gold, it is wise to evaluate America's strategic military position in critical oil producing regions. Not only obvious places like the ME, but the Americas (Canada, Mexico & Venezuela) & parts of Africa/Asia.

When people willingly short FRNs in favor of gold, they are in essence shorting the US military. Do you really want to make that bet?

The mighty U.S. military can't pacify a country the size of Texas when the opposition is drawn from little more than half the population.  Nukes don't solve this problem, either.  Our new policy to "pacify" Afghanistan is the same way our government pacifies its own citizens: with bribes.  Our time in the ME is limited; when the just-begun "next" downturn is more widely perceived, the seat bars on the roller coaster come down and lock and the currency crisis starts clacking up the first hill.  The currency supports the military, and the military supports the curency, but the economy supports them both.

Even the Soviet Union could keep it together as long as they could bribe a core group of apparatchiks with pseudo-western lifestyles.  When that ability ended, the Soviet Union ended.  The Soviet military ended right along with it.  It fell apart, completely.  Twenty years later it still is a shell of its former self.

 

MrPalladium's picture

"The Soviet military ended right along with it.  It fell apart, completely.  Twenty years later it still is a shell of its former self."

In South Ossetia/Georgia that "shell" showed itself to be mighty tough and devastatingly effective.

Why on earth would any foreign nation (or domestic revolutionary, for that matter) bother to confront and engage the empire's forces when the empire is doing such a bang up job of destroying itself?

"For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill" Sun Tsu.

Bendromeda Strain's picture

Tell "devastatingly effective" to those sailors who went down on their showboat submarine.

SWRichmond's picture

In South Ossetia/Georgia that "shell" showed itself to be mighty tough and devastatingly effective.

Against what?

StateofFraud's picture

WASHINGTON: After nearly a decade of rapid increases in military spending, the Pentagon is facing intensifying political and economic pressures to restrain its budget, setting up the first serious debate since the terrorist attacks of 2001 about the size and cost of the armed services.

Lawmakers, administration officials and analysts said the combination of big budget deficits, the winding down of the war in Iraq and President Obama’s pledge to begin pulling troops out of Afghanistan next year were leading Congress to contemplate reductions in Pentagon financing requests.....

baserunr's picture

You know, you are right!  I looked at some of my PM coins, and I didn't see the words "Federal Reserve Note" on them anywhere!

Johnny Bravo's picture

Remember what happened to the price of gold the last time the market tanked.  It sure didn't rise in a parabolic fashion.  In fact, it lost about 30% before the rally in March 09 began...

merehuman's picture

 

Johnnynadler cartoon reading palmwetter masturbator

Gosh i feel better, did it work for you?

Spitzer's picture

yeah I remember, it was the biggest fall of the dow in history and it hapend

on May 6th 2010. Gold was up $25 that day.

macroeconomist's picture

What utter bullshit? That is a BLATANT LIE. Gold went up from October 2008 to March 2009 from 750 to 1000, how shameless are you to claim this?Don't take anything this guy says seriously, he either doesnt know what he's saying or lying purposefully. I'm totally convinced he works for JPM in some way

i.knoknot's picture

gotta go with jb and the graphs on this one...

may 6 aside, gold didn't do so hot when everyone was dumping their loads that month in 2008.

i don't think anyone was feeling like anything was a safe-haven in that chaos. i do think folks are more secure in their sentiments now, and that the correlations would differ if/when it happens again.

disclaimer - i like gold (real is best, paper CEF in my ira), and i'm out for a while, expecting a similar dip. i'll get back in when the time is more 'right'. honestly don't know when that is.

disclaimer 2 - i think jb is usually coarse and mal-informed. usually. but right is right, and i think he's mellowing with age. we'll see.

Martel's picture

Gold bitchez!

Somebody had to say that.

Cactus Rocky's picture

Parabolic move, bitchez!

 

I am not Chumbawumba.

kapillar's picture

What are you morons? Like five years old or off duty from you chores at dishing out financial advice at the local Burger King? Really this has stopped being funny maybe September last year or maybe the year before. Go back to you whatever sales ward you are with and sell some cacao maybe. I have heard it's in a real bull market plus you can drink it warm when you get home to mommy.

John Bigboote's picture

Actually, the "finger, bitchez" comment yesterday was the funniest in weeks.

kapillar's picture

Sure. Just wait when they'll write "salad, bitchez", "gaussian blur, bitchez" or even "bitchez, bitchez". You'll need a shrink to return back to normal I presume.