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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Sun, 01/27/2013 - 00:09 | 3188687 mkkby
mkkby's picture

Kito, there's nothing wrong with stockpiling necessities.  But how much can you really put into hens and toiletries?  If you have a significant savings you need a more efficient way to store it.  Try moving around -- perhaps on short notice -- with $100k worth of toilet paper and canned peas. 

Gold carries a lot of value per weight/volume. That $100k can now be carried in one hand, or a coat pocket.

Don't even bother mentioning paper cash, because the very inflation you're protecting yourself from will destroy that.  Only carry enough for short term needs.

Sun, 01/27/2013 - 10:03 | 3188957 Karlus
Karlus's picture

You dont need to outrun the bear, just the fat camper next to you.

Just get over the supply chain breakdown and you will see a radically different world on the other side.

Sat, 01/26/2013 - 18:32 | 3188212 CheapBastard
CheapBastard's picture

They wont let me put a hen in my safe deposit box and my goats are too darn big!

Sat, 01/26/2013 - 18:51 | 3188252 kito
kito's picture

Hens are great....they give you physical retirement nest eggs.......

Sun, 01/27/2013 - 00:18 | 3188693 mkkby
mkkby's picture

Except hens require land, hard work and luck against nature.  Land is wealth that is not portable.  Land will be taxed until it breaks you.

Sun, 01/27/2013 - 01:48 | 3188766 FeralSerf
FeralSerf's picture

Hens eat even when their eggs aren't as valuable as the corn they eat.  You can't throttle them and still maintain your investment.

Sat, 01/26/2013 - 18:14 | 3188183 Water Is Wet
Water Is Wet's picture

Except they aren't losing the war.  Gold has gone nowhere for 18 months.

Sat, 01/26/2013 - 18:15 | 3188186 devo
devo's picture

Why is Turk selling gold if it's going up?

Sat, 01/26/2013 - 18:44 | 3188234 jimmyjames
jimmyjames's picture

Why is Turk selling gold if it's going up?

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

Turk doesn't sell gold--you send him cash-he buys gold-and stores it for a fee-if you want to trade your gold for cash--he sells it and gives you cash-

He's a gold bank-

Sat, 01/26/2013 - 18:47 | 3188242 devo
devo's picture

Gotcha, thanks.

What about someone like Schiff or Maloney? Why sell gold if it's going up? I just can't understand why anyone who is genuinelly bullish on gold would sell it. You'd want to hoard it, no? Unless they think they have enough and they're trading it at these "undervalued" prices to buy other assets. Or are they altruistic? lol

Sat, 01/26/2013 - 18:57 | 3188266 jimmyjames
jimmyjames's picture

What about someone like Schiff or Maloney? Why sell gold if it's going up?

***********

Gold is always for sale at some price-determined by the seller and buyer-some hold out for higher prices-some believe it's at fair value now and sell it-it's always been that way-

btw..i don't think Schiff sells gold either-

Sat, 01/26/2013 - 19:00 | 3188275 devo
devo's picture

Schiff sells gold (Europac Metals). He also says he thinks it's going up. I guess the only explanation is that he has enough personal gold and wants to trade excess for other assets.

Sat, 01/26/2013 - 21:06 | 3188460 S.N.A.F.U.
S.N.A.F.U.'s picture

You are confusing the dealings of Schiff's business with Schiff's personal holdings.  When you buy gold from Europac Metals, you are not getting Schiff's personal holdings.  (Just like when you go to the local coin shop and buy some AGEs, you are not getting the store owner's personal holdings, and when you go to the grocery store and buy tuna fish or whatever, that is not the store owner's personal tuna fish.)

I doubt Schiff feels "he has enough personal gold" in any absolute sense.  I certainly don't (wrt my own).  But you can only buy what you can afford.  And to afford more gold (and other assets/investments), it helps to have income.  Europac Metals is a source of income for Schiff.

Sat, 01/26/2013 - 21:17 | 3188483 devo
devo's picture

Yeah, that was bad wording on my part. I know we're not getting his gold.

Anyway, your explanation makes sense so no point writing anything else. It's just that ever since I started buying gold a few years ago I wondered the motivation of those selling it to me. They all think it's going up, yet they all want to sell.

Sat, 01/26/2013 - 19:03 | 3188281 fonzannoon
fonzannoon's picture

My guess is Schiff still knows that the dollar is far away from being supplanted and he likes buying shit.

Sat, 01/26/2013 - 19:10 | 3188295 kito
kito's picture

Eggactly.....all the dollar collapse doomers have begun softening...look at the last post by sprott...no mention of the end.....he says banks are better off today.....Bernanke may be a scumbag but he's a genius making nay Sayers look foolish......

Sat, 01/26/2013 - 19:18 | 3188306 fonzannoon
fonzannoon's picture

agreed completely kito. sprott snuck in there that lack of inflation could keep this going for years, that ain't the sprott i know. sneaky bastard that sprott. schiff still screaming the sky is falling. i'm watching him closely.

Sat, 01/26/2013 - 19:32 | 3188316 devo
devo's picture

I wouldn't call Bernanke a genius. All he's done is print money combined with lip service. He's managed this pretty well, though. More accurate is that (a) average person is financially illiterate or (b) financially literate but know there's no risk with a FED that has debtors' backs.

History will have the final say on Bernanke. Don't think it will be kind.

Sat, 01/26/2013 - 20:38 | 3188411 francis_sawyer
francis_sawyer's picture

Enough of this bullshit...

~~~

This is like the LAST 2 'traders' on the planet arguing about who will have the higher account balance in the end... [& you DARE to bring hens & goats into the argument]...

Sat, 01/26/2013 - 18:15 | 3188187 kito
kito's picture

Gold $10,000 = $2 egg.......wouldn't be pretty.....

Sat, 01/26/2013 - 18:23 | 3188195 fonzannoon
fonzannoon's picture

2 things Kito. first if you like the remnimbi and the remnimbi skyrockets because it is backed by gold does it really make a difference which one you own? 

secondly when gold hits 10k i will be in the bahamas riding around naked on a waverunner that came with some 100ft yacht that some banker coughed up. it will be like my own biggie smalls video. that is how i picture it anyway.

Sat, 01/26/2013 - 18:35 | 3188223 kito
kito's picture

The renminbi may be backed by gold....or not...but go east young man....because I am certain it will eventually de-peg from the dollar...and when it does....it's a slam dunk.....love the visual on the wave runner.....will you have 2 bikini clad babes holding tight to you????????

Sat, 01/26/2013 - 18:36 | 3188224 Yen Cross
Yen Cross's picture

The "yuan" is backed by $ equivelant 2.3 Trillion. The Chinese are using their F/X reserves overseas, because of capital inflows.

 The PBoC has been net outflow for almost a year, before Bernanke decided to add an additional $45 B in MBS late last year.

  China is worried about Inflation, and can't even do reverse repos, out of inflow concerns and loss of price (export) adavantages.

Sat, 01/26/2013 - 18:47 | 3188243 fonzannoon
fonzannoon's picture

Yen when China de pegs as Kito and I anticipate won't they update their world gold holdings to reflect reality, as well as other non dollar assets to back their currency? sure their exports may get creamed but their citizens will also see substantially falling prices as a reward of a strong currency. seems like a decent tradoff.

 

Sat, 01/26/2013 - 18:57 | 3188268 Yen Cross
Yen Cross's picture

Don't hold your breath.

Sat, 01/26/2013 - 19:01 | 3188278 fonzannoon
fonzannoon's picture

I hear you. Trust me, I'm not holding it. I think I will be on here 10 years from now saying the same shit.

Sat, 01/26/2013 - 18:55 | 3188261 Dr. No
Dr. No's picture

Explain how the yuan is backed.  Is Yuan convertable to gold if you walk into the CB of China and ask for a swap?

If because they have gold reserves, you think the currency is backed, you are mistaken.

Sat, 01/26/2013 - 19:00 | 3188277 fonzannoon
fonzannoon's picture

I think they are stockpiling reserves in all sorts of commodities and resources. That may or may not play out in the future into a backed currency.

Why do we complicate all this? Why can't we keep bombing people and taking their shit?

Sat, 01/26/2013 - 19:06 | 3188288 kito
kito's picture

Yes they are stockpiling NECESSITIES.......which everybody should be doing before physical dollars become scarce......

Sat, 01/26/2013 - 22:13 | 3188414 francis_sawyer
francis_sawyer's picture

OK ~ We all know where kito stands...

~~~

kito thinks that grandma needs to start stacking BENJAMINS on wooden palletes in the garage so that ONE DAY she can corner the market on catfood & become a WALTON...

Sun, 01/27/2013 - 00:23 | 3188700 kito
kito's picture

i appreciate you bolding my username....makes kito bashing easier to find..............

Sun, 01/27/2013 - 09:09 | 3188914 francis_sawyer
francis_sawyer's picture

You're easy to find as it is...

~~~

All you have to do is look for the avatar whose sister is 'a little bit country' [but he's 'a little bit rock & roll'] with a mountain of red arrows next to it...

Sun, 01/27/2013 - 00:23 | 3188701 mkkby
mkkby's picture

Grandma says "meow", which in english means "+1 funny".

Sat, 01/26/2013 - 19:11 | 3188294 Dr. No
Dr. No's picture

I guess my point is , so what.  In theory, the US gov has a bunch of gold too.  Does that mean anyone can get their hands on it if they have currency and walk into the treasury?  No.  The governments gold is the governements gold.  The strenght of the dollar has nothing to do with some gold stockpiled somewhere.  Either is the yuan.

 

Show me the graph of dollar strength as a function of gold reserves again.  Lets assume gold reserves are constant at 8000 tons (just assume for a minute).  The dollar has been falling like a stone since confiscation.

Sat, 01/26/2013 - 19:25 | 3188313 fonzannoon
fonzannoon's picture

the graph would accurately show dollar weakness as dollars expand against a steady quantity of gold. 

Sat, 01/26/2013 - 19:47 | 3188337 Yen Cross
Yen Cross's picture

The H-4 chart in fact (dxy) shows a bottom forming. I'll gladly send a screen shot. Your Mentor KITO, is full of shit, and I'll debate (IT) at a moments notice.  Fonz you are a brilliant man. You are capeable of making your own decisions. KITO is a fucking clown, and I invite him to discuss finance with someone  his own size!

Sat, 01/26/2013 - 20:21 | 3188388 kito
kito's picture

Yen I'm surprised by your vitriol towards me....perhaps it's masking some insecurity about your world view....I don't give a shit about your charts....I'm not concerned about your bottom, thank you...your charts are worthless when an asset catharsis occurs....the dollar chart is pointless when every digital dollar evaporates and whats left is a massive shortage of physical currency that everybody will be scrambling for.......

Sat, 01/26/2013 - 22:17 | 3188420 francis_sawyer
francis_sawyer's picture

 "the dollar chart is pointless when every digital dollar evaporates and whats left is a massive shortage of physical currency that everybody will be scrambling for"

~~~

Biggest DIPSHIT comment ever... Haven't you looked?... THEY'RE NOT EVAPORATING MOTHERFUCKER... As of last entry, they're all STILL being logged on to CENTRAL BANK balance sheets around the world...

It's called MARK TO FANTASY... [which, I'm sure, your accountant has assured you is standard practice & you were stupid enough to believe him]...

EVEN BIGGER dipshit idea is the thought that this will all... eventually... get solved on ledgers, graphs, & "x" "y" chart matrices... IT WON'T... NONE of these records are etched IN STONE... They're etched on silicon chips... This FUCKING 'LAUGH' of a JEW WANNABEE civilization will get evaporated before anyone even has the time to go hungry... It'll probably take 20,000 years & 3 ice ages [IN THE FUTURE] before anyone ever knew Jews or Al Gore ever existed...

Ever wonder what happened to the 'CAPSTONES' on the fucking pyramids?... No ~ I'm sure not... You were to busy getting your "buy 1 get 6 FREE" sale at Jos A Bank...

Sun, 01/27/2013 - 00:24 | 3188702 kito
kito's picture

biggest dipshit comment ever?????? more so than anything ever uttered by robotrader??????

Sun, 01/27/2013 - 00:27 | 3188706 kito
kito's picture

out of curiosity, are you an across the board anti semite??? like the stormfront kind??? or just anti jew in power and control of the countrys monetary/finance kind???

Sat, 01/26/2013 - 22:25 | 3188594 devo
devo's picture

Yeah but that will take Joe Sixpack (or his Chinese equivalent) 80 years to figure out. In the meantime, it will instill confidence in fiat.

 

Sat, 01/26/2013 - 18:23 | 3188196 Sudden Debt
Sudden Debt's picture

yeah... bald eagle eggs are getting pretty expensive... but whenever you eat some with bacon... H H HMMMmmmmm!!!!

Sat, 01/26/2013 - 18:22 | 3188193 Sean7k
Sean7k's picture

For just once, I would enjoy hearing the ramifications of gold and silver appreciating versus the methods of government to control and tax that appreciation. 

You cannot divorce the State from a paradigm shift in what constitutes money, without considering the steps it will take towards tyranny. The response of the people. Especially if the people, by and large, fail to own any of the precious. The response of business, if it has to price contracts in money that it probably has no savings of. The movement of this new money through commerce in general. 

It is not going to be all rainbows and skittles with silver at $400 and gold at $8000, because what will a dollar be defined as? Will you even want one? 

The level of economic destruction will be considerable, as will the social destruction. 

We need more discussions about real bills, freegold, new currency and capital requirements, and finally- electronic exchange. It would be a brave new world. Having gold and silver will not make you the local millionaire, unless there are systems available to maintain peaceful exchange. 

Having gold and silver is an excellent investment- because as Turk makes plain: it is undervalued money. However, money is a lubricant for exchange in an economic system. What will be important is the nature of the new system and WHO will be running it. Will they be acceptable stewards? Because my gut says it will be the same guys who screwed us this time.

Sat, 01/26/2013 - 18:31 | 3188209 debtor of last ...
debtor of last resort's picture

Nobody knows. Shut up and keep stacking.

Sat, 01/26/2013 - 22:26 | 3188597 WT Sherman
WT Sherman's picture

Sean7K.  Good post.  The big question is: How do people like me, who have 80% of their $$$ in cash and equities, transition from holding increasingly worthless cash to hard assets like PMs, and eventually emerge with enough capital or assets to barter or survive on as Western economies collapse?

I welcome all ideas or opinions on what this transition looks like because IMO it's the one that keeps people up at nights.

Sun, 01/27/2013 - 09:09 | 3188916 Sean7k
Sean7k's picture

I would suggest you consider allocating your largest percentage to hard assets in general. Your liquidity needs only you know, but hard assets maintain value, regardless of the policies of the central banks. 

As for the other. The most peaceful means to effect a change is to eliminate legal tender laws. This one action would force every bank and government to reverse policies and give the people the greatest voice in determining the value of money.

Good luck.

Sat, 01/26/2013 - 18:46 | 3188231 AgAu_man
AgAu_man's picture

The Turkmeister is so spot-on!  I like him and respect his opinion, because his views are based in reality, are rational, cogent, and verifyable.  Thanks,  Adam Taggart and Peak Prosperity.  We love your DVDs at home and with friends.

I think that the MORAL of his story -- when applied to the masses and 'We The ZH' -- is: 

   1. Buy 'Hard-PM' on fiat-currency price dips and as you can afford to

   2. Make PM's a decent part of your overall wealth-storage

   3. Keep investing in other real assets for other risks & crisis mitigation

   4. Hope & Pray that you will have stored up enough 'PM HW' and other 'HW and SW' before there is a run, and PM-shelves and store shelves are raided. 

   5. Do NOT kid or delude yourselves:  TPTB/TBTF Elite will be the first in line for the last bits of PM-HW available, and the rest will be left out. 

Don't be part of the "Woulda, coulda, shoulda" crowd!  And don't forget to SPREAD THE PRECIOUS WORD through your sphere of influence, to help make it self-fulfilling sooner than later.

 

Sat, 01/26/2013 - 18:42 | 3188233 Jeepers Creepers
Jeepers Creepers's picture

I'm a physical stacker of precious metals, but philosophically, I don't  buy the notion that gold is always a "sterile" asset that stands still. 

How do you explain gold at $271 an ounce in 2001? Or when gold was at $615 in 1980?  Obviously there was not deflation in those 20 years.  No matter what scale of buying power you want to look at, the purchasing power of a dollar has not been eroded by anywhere near that margin when comparing the current price of gold today from when it was stuck at around $300 an ounce.

I look at gold and other precious metals as sort of a last refuge.  I have no doubt we may be in a situation where we're paying top dollar because we need water during a really bad drought, but that doesn't mean it's a bad investment when you look at the alternative.

Sun, 01/27/2013 - 04:34 | 3188818 Vlad Tepid
Vlad Tepid's picture

The purchasing power of the dollar to buy gold sure has changed since 2001.

I think you missed that point of his, you can only compare gold as an asset to other currencies: yen dollar euro etc.  

Then look at fiat:  it is currently held together as a function of belief, hope, air, and unicorn farts.  That can continue, like the overused metaphor of Wile E Coyote, until the people who buy products (from gas to oragnes to Netflix stock) realize it's nature and it all falls apart.  This doesn't happen much in history (globally), but when it does it's a doozy.

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