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James Turk: Central Banks Are Losing The War to Suppress Gold & Silver Prices

Tyler Durden's picture




 

Submitted by Adam Taggart of PeakProsperity

James Turk: Central Banks Are Losing The War to Suppress Gold & Silver Prices

My guess is that 2013 and 2014 are going to be big up year for the precious metals, but we still have to contend with the central planners and the various government policies, which have been actively trying to keep the gold and silver prices from reaching fair value. The central planners are losing the war. They may win an occasional battle or two, but they’re losing the war, and eventually gold and silver are going to go higher.

So predicts James Turk, founder and Chairman of GoldMoney.com.

From James’ perspective, gold is not an investment. It’s a sterile asset, meaning it does not generate income. What it is, is money. Its function is to store wealth.

But money, like investments, can be overvalued or undervalued. And what we’re witnessing on the world stage is a gross mispricing of money as central banks engage in depreciation of their fiat currencies via inflation (i.e. money printing).

The process causes a transfer of wealth from those holding overvalued money to those who hold undervalued money. That’s what’s been going on for the past decade as the price of gold has steadily marched upwards versus fiat currencies.

But this process is not efficient. Mass awareness of this wealth transfer is low, so confidence in paper currencies is still high, supporting their perceived value. Market intervention by central banks and other parties conspires to keep the prices of precious metals artificially low and suspect.

This maintains an arbitrage for individuals to buy gold and silver at a discount to true value, which James believes will be slowly realized in full over the next several years as the bull market in precious metals approaches its third and final phase.

A factor in this rise will be the increasing fragmentation of coordination among the central banks. Increasingly, central banks outside the influence of the US’ Federal Reserve are treating the precious metals as true money, and becoming net buyers of bullion for their reserves.

Ultimately, Turk predicts the price of gold will move to somewhere between $8,000-10,000/oz, and that we'll see even higher price appreciation in silver.

The way markets normally work is, after you do have a big move, you get a correction. Even over the past 12 years, if you look at gold, you had big moves in 2005, 2006, and 2007 where you were in some years generating over 20% appreciation in gold. Then you had the correction in 2008. Even though that was a correction, gold was still up that year. Then, in 2009 and 2010 and the earlier part of 2011, you had again big moves. Then you had the correction where basically they moved sideways. My guess is that 2013 and 2014 are going to be big moves on the upside, because what’s important here is not so much the price of gold, but whether it’s a good value.

 

The proper way to manage a portfolio is, you move assets that are overvalued out of your portfolio and you concentrate on assets that are undervalued. That’s true regardless of whether you’re talking about investments or money. You want undervalued forms of money. You want undervalued investments. I use a couple of mathematical formulas which I’ve written a lot about, one being the Fear index and the other being the Gold money index; by both of those measures, gold is still very, very undervalued, as is silver, for that matter. Silver is even more undervalued than gold. My expectation is that these undervalued assets will continue to rise in price, because the market doesn’t like levels of overvaluation or undervaluation. The market is always constantly changing, moving money out of overvalued assets and moving into undervalued ones. And that’s what we’re basically seeing in the precious metals: people are moving out of overvalued fiat currencies and moving into undervalued gold and silver.

 

My guess is that 2013 and 2014 are going to be big up years, but we still have to contend with the central planners and the various government policies, which have been actively trying to keep the gold and silver prices from reaching fair value. The central planners are losing the war. They may win an occasional battle or two, but they’re losing the war, and eventually gold and silver are going to go higher – assuming that governments and central planners and central banks still continue to follow these same policies that they’ve been doing, which is defacing fiat currencies.

 

An interesting thing is that when we saw the price drop in gold and silver at the end of 2012, the demand for physical metal rose tremendously because people recognized that these assets are undervalued, and if they’re going to be sold down to such cheap prices, they may as well just pick them up and continue to accumulate them. So it certainly has a perverse affect when the central banks intervene. In fact, as we’ve noted, gold has risen 12 years in a row against the U.S. dollar – double-digit rates of appreciation. But I guess the best way is using an analogy. If you've got a pot of water boiling on the stove and it’s bubbling away, every once in a while you have to release or pull off the lid to let a little bit of steam out, and then you put the lid back on.

 

That’s sort of what the central planners are doing. Every year they release the lid, and gold on average has risen over the last 12 years by 16.8%. Then they put the lid back on. One of these days they're not going to be able to put the lid back on, and you're going to go into the third stage of a bull market where gold just keeps rising and rising and rising because confidence will be lost in the currency. I think that’s what we have to be focusing on.

 

I can’t say that trust between central banks is waning, but you have to recognize that there are two categories of central banks: There are central banks that are in the U.S. circle of control and dominance, and then there are central banks outside the circle of U.S. control and dominance. The ones that are outside of the U.S. control and dominance are accumulating physical gold. The ones within the U.S. control tend not to do that, although it’s interesting that Germany, Netherlands, and now Austria, too, are talking about bringing their gold back.

 

It’s quite clear that a lot of promises have been made, particularly by politicians and most governments around the world, and those promises cannot possibly be fulfilled. A lot of those promises are going to be broken. Particularly when it comes to the area of gold, a lot of central banks are relying on the promises of other central banks. Oh, yeah, we’ll be good for the gold if you ever ask for it. Those promises are likely to be broken as well, as the demand for physical metal continues to grow. Whether it’s going to accelerate in 2013, 2014, I don't know. But, my guess is the demand for physical metal is indeed going to accelerate over the next couple of years, because I’m looking for serious financial problems to be hitting. 

Click the play button below to listen to Chris' interview with James Turk (34m:47s):

Click here to read the full transcript

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Sat, 01/26/2013 - 18:32 | 3188208 francis_sawyer
francis_sawyer's picture

I'll hold it for you YC... [While you're at it, I'll hold onto your jet & Ferrari]...

Sat, 01/26/2013 - 18:45 | 3188240 Yen Cross
Yen Cross's picture

 Don't you understand the n. exploratory? Oh you only read the first sentence...  I don't own Jets. Yes, I own a few Ferraries.

Sat, 01/26/2013 - 20:01 | 3188360 francis_sawyer
francis_sawyer's picture

kewl then... I'll just hold those [& your gold]... For a FEE [of course]... ror

Sun, 01/27/2013 - 04:14 | 3188811 Vlad Tepid
Vlad Tepid's picture

But YC, people who own Ferraris usually don't misspell "Ferraris."

Sat, 01/26/2013 - 18:17 | 3188189 fonzannoon
fonzannoon's picture

why does he give a shit what u put in a safety deposit box? They can't led out etc. anything in a safety deposit box. he should have thanked you for making the wise decision to own physical metals and the foolish decision to trust them with it.

that is weird

Sat, 01/26/2013 - 18:30 | 3188201 Yen Cross
Yen Cross's picture

 Banksters trade leverage.  Hold a bankster party in a "Gold Mine" and the ghosts/ Tommy knockers will sort it out ;-)

  Fonz, the C/U doesn't have "safe deposit boxes". None of them do. They don't want the liability of storing physical metal, diamonds, rubys, Art, Ect...

Sat, 01/26/2013 - 18:32 | 3188213 fonzannoon
fonzannoon's picture

i wonder wy that is. i'm sure the TBTB banks would love for people to keep their PM's in a safety deposit. 

Sat, 01/26/2013 - 18:38 | 3188227 Yen Cross
Yen Cross's picture

You're fired up Fonz.  Bundsbank respectfully disagrees.

Sat, 01/26/2013 - 18:42 | 3188236 fonzannoon
fonzannoon's picture

nah i'm cool. sorry if i came off wrong. i have read in argentina a lot of people kept pm's and other valuables in their banks safety deposit boxes. when they defaulted and the banks were shuttered those people never were allowed in to get their valuables. the banks kept em. makes me think it could happen here too and the banks would love to have it. i know people who keep cash in their safety deposit boxes too. seems like the same situation. kiss it goodbye.

Sat, 01/26/2013 - 18:52 | 3188256 Yen Cross
Yen Cross's picture

 Fonz, It's ok. You have been through a LOT of turmoil. Neighbors losing homes, protecting your family, and a "plethora" of other personal decisions.  I'm amazed at how well you have adapted.

 FWIW/ Fuck the malls, and the over rated " Chee(s)ze Cake Factory"... yer doing just fine in my book.

Sun, 01/27/2013 - 11:11 | 3189019 sessinpo
sessinpo's picture

Yen Cross mentioned Credit Union. That is hardly TBTF

Sun, 01/27/2013 - 11:16 | 3189024 sessinpo
sessinpo's picture

Yen Cross:   "I called the President of my credit union branch office earlier this week. I asked him if I could store some physical bullion, in a safe deposit box. His reply was, we don't store metal at any of our branches, and "Thank God we don't"... My first thought was collateral, on new and outstanding loans. Am I wrong?

FreeMktFisherMN replied:  "Don't know why you'd want any institution to hold it in the first place. "

Yen Cross replied "That wasn't my intention. You are correct. My intention, was discovery."

 

Comment. Yen Cross, you just wasted a lot of your valuabe time for nothing to get a BS story that has no meaning.

 

Sat, 01/26/2013 - 18:09 | 3188177 debtor of last ...
debtor of last resort's picture

Manipulation presentation from Gata, the latest; http://www.silverdoctors.com/bill-murphy-chris-powells-full-presentation...

Sat, 01/26/2013 - 18:14 | 3188182 fonzannoon
fonzannoon's picture

if the dollar has been losing value every year for like 80 years i wonder when Turk will consider it "undervalued". 

his analogies are kind of annoying. the lid on the pot etc. this is not about managing porgfolio's anymore. the cental planners are playing a different game. Turk sounds like a football commentator trying to rationalize why a game played out a certain way. there are too many variables now. if the central planners have as firm of a grip on the markets as we think they do they should have no problem sending the paper price down huge. 

the best chance gold has is for someone to claim that they asked for their gold and got shafted. something has to seperate paper from physical. until then this just goes on and on.

Sat, 01/26/2013 - 18:27 | 3188203 kito
kito's picture

The gold bulls continue to believe au and ag are the answer.........I've been saying for quite a while that it just isn't the case....take the money and put it into something people will need....when the worlds assets implode, gold will be dragged down by the neck.......id rather stock up on physical dollars, toiletries, ammo, hens, goats, etc......nobody needs gold......but they will need dollars to buy necessities.........

Sat, 01/26/2013 - 18:32 | 3188211 Water Is Wet
Water Is Wet's picture

Why will people need dollars to buy necessities?  Seems like an arbitrary assumption, like all assumptions.  It's fine if you are making it, but just know you are making it.

Sat, 01/26/2013 - 18:34 | 3188221 fonzannoon
fonzannoon's picture

i agree with that Kito. that is the fly in your ointment. it is an assumption. it reminds me of people saying "housing has to go up, they ain't making more land". 

i also think gold bugs are making an assumption that when the whole thing falls apart, gold will be money again.

nobody knows and everyone is going to have to make their best guess. 

Sat, 01/26/2013 - 18:49 | 3188246 jimmyjames
jimmyjames's picture

i also think gold bugs are making an assumption that when the whole thing falls apart, gold will be money again.

***********

Gold has always been money-bankers and governments saying it isn't-doesn't change that fact-

Gold acts like money-people save/hoard it and so it is money-by that definition-

Sat, 01/26/2013 - 18:44 | 3188238 kito
kito's picture

Of course it's an assumption.....a logical one.....when every overpriced asset goes kaboom, every digital dollar gets erased, only cold hard cash and necessities will rule the day........gold is not a necessity......

Sat, 01/26/2013 - 18:52 | 3188253 fonzannoon
fonzannoon's picture

it is a very logical one. so is the gold assumption. i have decided to own both. that should alert everyone on here that they will both be wrong. because i have the power to mush both.

Sat, 01/26/2013 - 18:54 | 3188259 kito
kito's picture

Very Buddhist of you fonz....the middle way.....

Sat, 01/26/2013 - 19:44 | 3188333 Yen Cross
Yen Cross's picture

 You are a douche/ Let's play.

Sat, 01/26/2013 - 19:26 | 3188314 BigDuke6
BigDuke6's picture

Any gold bug worth their salt knows that at the height of the chaos gold should be exchanged for high quality real estate.
You don't worry about eggs if you've got the farm

Sat, 01/26/2013 - 19:51 | 3188343 Yen Cross
Yen Cross's picture

This KITO pawn shop owner makes me laugh!

Sat, 01/26/2013 - 20:09 | 3188375 kito
kito's picture

Yen, did you just call me a douche???

Sat, 01/26/2013 - 21:14 | 3188476 Jendrzejczyk
Jendrzejczyk's picture

Your avatar is Donny Osmund, and you're surprised?

Sat, 01/26/2013 - 21:22 | 3188488 kito
kito's picture

drop the avatar into the google image search bar....donny won't be popping up....

Sat, 01/26/2013 - 22:12 | 3188560 Jendrzejczyk
Jendrzejczyk's picture

You're off the chain if this is Miss Kito

http://www.checkoutmyink.com/tattoos/robertcyber/miss-kito-1

Sat, 01/26/2013 - 23:56 | 3188679 kito
kito's picture

Mrs. Kito to you sir.......

Sun, 01/27/2013 - 04:18 | 3188813 Vlad Tepid
Vlad Tepid's picture

And I just learned that you can search google by dropping images in the search bar...where the f*&k have I been?

Sun, 01/27/2013 - 11:49 | 3189044 krispkritter
krispkritter's picture

...and STOP using Google!

Sat, 01/26/2013 - 20:30 | 3188400 BigDuke6
BigDuke6's picture

CMon get fighting you 2

Sat, 01/26/2013 - 20:34 | 3188404 francis_sawyer
francis_sawyer's picture

@BigDuke6

~~~

You're breaking a cardinal rule of 'FIGHT CLUB' [only 2 to a fight]... But since it seems EVERYONE is piling on... kito ~ WTF do you know about 'goats'?

Sat, 01/26/2013 - 20:46 | 3188423 kito
kito's picture

Goats are kosher.....Ben bernanke and Lloyd blankfein are not........

Sat, 01/26/2013 - 20:51 | 3188431 francis_sawyer
francis_sawyer's picture

White shirts [from Madame Paulette] & silk neckties are cool

Blue shirts [from Jos A Bank] & discounted blue blazers are not

Sat, 01/26/2013 - 21:00 | 3188443 kito
kito's picture

I'd rather be a real man shopping at jos a bank than a metrosexual shopping at Madame Paulette........

Sat, 01/26/2013 - 21:02 | 3188448 kito
kito's picture

I'm still waiting to hear from yen who seems to be pms-ing.........

Sat, 01/26/2013 - 21:11 | 3188467 francis_sawyer
francis_sawyer's picture

maybe he's doing barrel rolls in his GulfStream...

~~~

& I'll take the Madame Paulette comment ON PAR... In any case, francis_sawyer prefers overalls [but that's just ME]...

Sat, 01/26/2013 - 21:00 | 3188444 BigDuke6
BigDuke6's picture

Hey I'm sorry but I've wanted to see these two ladies in a mud wrestle for like ever.
I'd insult you but we'd end up agreeing that crockettalmanac is a crock of shit

Sat, 01/26/2013 - 21:04 | 3188455 kito
kito's picture

You really need to re-prioritize your long standing desires.......not something you should be proud of.....

Sat, 01/26/2013 - 21:14 | 3188475 francis_sawyer
francis_sawyer's picture

@Duke

~~~

I've been trying to draw CROCKETT out of his cave for a week now... ALAS ~ that teddy bear is in hibernation until his agent calls him for the next 'Snuggies' commercial gig...

Sat, 01/26/2013 - 21:36 | 3188511 BigDuke6
BigDuke6's picture

He was following ur every move before...
He's been true to his threat , no more following until you be nicer

Sat, 01/26/2013 - 22:11 | 3188540 francis_sawyer
francis_sawyer's picture

'Nicer'.. to me... would appear [on surface], to be 'ANTI-Darwin-ist'... Not to classify francis_sawyer as a DARWINIST, per se... But the backwards reference still holds... 

~~~

& Duke... BESIDES... It's SATURDAY NIGHT... You need a little gay-boy music to get the party rollin'...

~~~

http://www.youtube.com/watch?v=SqpOxaUVWwA

Sat, 01/26/2013 - 21:16 | 3188478 BigDuke6
BigDuke6's picture

Lol
And I like ZH when it's like a western saloon where everybody is throwing chairs and there's 10 punch ups at the same time
So let's go!

Sun, 01/27/2013 - 03:49 | 3188527 fonzannoon
fonzannoon's picture

This whole debate comes down to inflate vs default.

ZH Golden boy has this to say (go to 15.35 mins in to 16.20 mins)

http://www.youtube.com/watch?v=JUc8-GUC1hY

Either road in my opinion leads to cash being trash.

I see Kito's point though. In deflation, for a while, cash can be king. Debt destruction and deflation ends up taking down the banks. If that happens the dollar goes to shit anyway and you get mad max. But mad max is probably what's coming either way, so why bother arguing? They will print and grab everything they can with it, and try to hold on tight when the whole thing goes to shit.

Sat, 01/26/2013 - 19:47 | 3188282 FreeMktFisherMN
FreeMktFisherMN's picture

but between 'then' (SHTF) and now (and always, for that matter), the way to protect (and enhance) your wealth is through PM ownership (mining companies, too, though obviously I'm for anti-counteryparty risk). Put physical cash in your mattress and purchasing power goes way down as things like the DJIA (nominally) levitate and you're having your 'capital' earn nada to keep up. 

Contrary to the modern portfolio theory/long term cap mgmt model, wherein the 10 year note is the 'risk-free' 'asset,' the most conservative risk-free play is gold. Even if say gold tanked quite a bit like it did in '08 or whatever, it still held up a lot better than the Dow, and above all it preserved wealth. Oil and other things also went down, so priced in real terms gold did the job of preserving purchasing power. Holding PMs is the only way to not get wiped out. Sure, purely in terms of what happened and in this silver manipulation time, selling at the top of $49 or whatever and then buying again as it's now around $31 would have worked out 'better' in terms of selling high, buying low, but eventually (and I think we're getting close here as the markets don't reflect the Main. St. economy and the Fed can't print purchasing power) everything will shoot up (nominally) and cash holdings will get wiped out by the hyperinflation finally manifesting itself as higher prices as elderly Asians cash in their savings and finally do some consumption they've put off, sending a tsunami of dollars back here. 

In short, holding PMs is the only way not to get wiped out. If we got the crash we needed and liquidation is allowed to happen, and real valuations occur, gold would still preserve value, and I think would still be way higher even than it is today because of all the money already printed globally. It is super under-valued.

Sat, 01/26/2013 - 19:04 | 3188283 FreeMktFisherMN
FreeMktFisherMN's picture

but between 'then' (SHTF) and now, the way to protect (and enhance) your wealth is through PM ownership (mining companies, too, though obviously I'm for anti-counteryparty risk). Put physical cash in your mattress and purchasing power goes way down as things like the DJIA (nominally) levitate and you're having your 'capital' earn nada to keep up. 

Contrary to the modern portfolio theory/long term cap mgmt model, wherein the 10 year note is the 'risk-free' 'asset,' the most conservative risk-free play is gold. Even if say gold tanked quite a bit like it did in '08 or whatever, it still held up a lot better than the Dow, and above all it preserved wealth. Oil and other things also went down, so priced in real terms gold did the job of preserving purchasing power. Holding PMs is the only way to not get wiped out. Sure, purely in terms of what happened and in this silver manipulation time, selling at the top of $49 or whatever and then buying again as it's now around $31 would have worked out 'better' in terms of selling high, buying low, but eventually (and I think we're getting close here as the markets don't reflect the Main. St. economy and the Fed can't print purchasing power) everything will shoot up (nominally) and cash holdings will get wiped out by the hyperinflation finally manifesting itself as higher prices as elderly Asians cash in their savings and finally do some consumption they've put off, sending a tsunami of dollars back here. 

In short, holding PMs is the only way not to get wiped out. If we got the crash we needed and liquidation is allowed to happen, and real valuations occur, gold would still preserve value, and I think would still be way higher even than it is today because of all the money already printed globally. It is super under-valued.

Sat, 01/26/2013 - 20:07 | 3188373 FreeMktFisherMN
FreeMktFisherMN's picture

I think it'll be every bit as bad as the Great Depression, only this time it will be a hyperinflationary depression way worse, as back then at least the U.S. had the industrial capacity to produce things, whereas now we it is the global engine of inflation.

Sat, 01/26/2013 - 21:19 | 3188484 augustus caesar
augustus caesar's picture

Capital hoarding. Deflation. There'll be massive civil unrest and war before hyperinflation takes off. Weimar has not been forgotten by the Europeans or Americans.

Sat, 01/26/2013 - 21:30 | 3188503 FreeMktFisherMN
FreeMktFisherMN's picture

People will realize what real wealth is. Protecting one's family and one's self, having food, having surplus to trade. People will only trade goods for things they trust, and gold is trustworthy.

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