Eric Sprott: Is the West Dishoarding Its Sovereign Treasure?

Tyler Durden's picture

Submitted by Adam Taggart via Peak Prosperity,

We are well into the financial crisis. Everyone’s trying to keep it together, even though it would appear from the reading of the economy things are not going well at all here. And everyone's ignoring things.


But I think, in their hearts, the Central Bankers must know what they’re doing is totally irresponsible. And the tell of that irresponsibility which is the debasing of the currencies is the fact that real things will go up in value. This should be reflected in the price of gold and silver.

So expresses Eric Sprott, CEO and founder of Sprott Asset Management, and one of the most experienced and vocal advocates for owning precious metals.

The past decade has validated Eric's thesis, as gold has risen considerably against all world fiat currencies. But what vexes him is that in recent years, when currency debasement has accelerated to extreme levels, precious metals prices have been clearly suppressed, particularly versus the U.S. dollar.

As the topic of price manipulation is nothing new, Eric finds his focus increasingly drawn to where the precious metals are going at these bargain prices - who is accumulating and who is dishoarding:

I’ve done a lot of work on the flow of metals. I come up with a net change of 2,300 tons a year in new buying in gold when the supply of gold hasn’t even gone up in the last twelve years. And you keep wondering: Well, where’s all this gold coming from?

His findings support the growing meme that there is a massive bullion transfer from West to East. This should particularly concern those in the U.S., EU and Canada as his suspicion is that, increasingly, it's monetary gold that is being sold.

There are several key questions to ask here (not that the data publicly exists to answer them):

  • How much of our sovereign monetary bullion reserves have been sold to date?
  • How much will be sold in the future? (Are we willing to sell all of it? or is there a limit we refuse to let go of?)
  • What will happen to the price of gold & silver when central banks stop selling to another? (Answer: shoot the moon)
  • What will be the fate of those economies that dishorded their treasure? (Answer: lamentable)

When I see China buying 95 tons of gold in December and I read that India bought 100 tons in the month of January, when we all collectively know there’s only about 200 tons a month available –  you have to conclude that G6 Central Banks continue to sell their gold in a very non-transparent fashion.


One of the things we saw in December was that the U.S. Department of Commerce reported that U.S. exports of gold were $4 billion. We exported 2.5 million ounces of gold. And where it comes from, [only] God knows; the country only produces 8.8 million a nd most of that’s used internally. So I don’t know how you just come up with 2.5 million ounces that you’re able to export. So I believe that even though it’s described as non-monetary gold, my guess is that it is monetary gold.


There’s lots afoot here in central banking to try to keep it organized. And I think one of those things is to keep the price suppressed.


But the non-G6 nations have been huge buyers of gold, and I think the more anybody looks at the system from outside looking in, they realize they have to have gold and silver, notwithstanding the nonsense that goes on in COMEX and the LBMA (London Bullion Market Association).


When I got involved in the gold market, it was assumed that the central banks had something like 36,000 tons of gold. And there was a great study done by Frank Veneroso where he suggests 18,000 those tons didn’t even exist anymore.


The [global] central banks are sellers of 400 tons in an overt fashion. Now we see buying of over 500 tons. That, just in itself, is a 900-ton change in a 4000-ton market, if I’m including recyclables here. And yet there’s been no increase in supply.


So I have to assume that these central banks are running low, and the question in my mind is, do they just go down to zero and then give up?


Or do they look in the cupboards one day and say look, this is just not going to work because the intensity of buying by people, like China in particular, has just gone absolutely bonkers. And it looks like India, notwithstanding putting a surtax or excise tax on gold, the demand seems to be very firm. And as you mentioned, mint sales have been amazingly strong here.


So I think there’s enough element of the world who get it that the pressure’s going to continue to be on the price of gold going higher. And yes, there’s nothing we can do in terms of what’s going on in the COMEX and the LBMA, but we keep seeing more and more people asking for delivery, even in the COMEX. So I think that the day can’t be far off. We can’t predict when it’s going to be, but the natural stage should be that the price of gold is going up, and we’re in such a tremendous financial crisis that it hasn’t been allowed to manifest itself because they’re putting out fires all the time.

For precious metals holders licking their wounds from the carnage of the past several months [23], this podcast offers both new insights and sound reminders of the long-term reasons for owning gold and silver. Those on the sidellines considering entering into the precious metals, perhaps for the first time, should consider reading our guide to Buying Gold & Silver [24] after listening to this podcast. 

Click the play button below to listen to Chris' interview with Eric Sprott (34m:40s):

Click here to read the full transcript

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Shell Game's picture

"tell me what you and the 20% are going to wake up to"


With any luck to a world not under the control of the plutocrats.  To me, that is the only hope for our children's future, thus the only thing that matters.  

howenlink's picture

I'm going to wake up to my chickens, rabbits, and vegetable garden.  Then I'm going to wake my kids and make breakfast.

gaoptimize's picture

"Il faut cultiver notre jardin" - Voltaire's Candide. I planted 6 apple trees today.

msmith9962's picture

I started my first hugelkultur bed.

fijisailor's picture

I can clearly see you have a victim complex.  Have you ever been in control of your own life?

OutLookingIn's picture

Novus ordo seclorum

Capitis diminutio maxima

PUD's picture

Shit happens friend. i neither welcome or fear it and i don't care who's to blame. If I get cancer and die I won't blame the disease and i won't feel the victim either. You are under a grave misaprehension thinking that you will emerge triumphant because of your meticulous planning and pile of shiny coins.

css1971's picture

you will emerge triumphant because of your meticulous planning

Funny. That seems to happen quite regularly. Of course some plan better than others but y'know the boy scouts motto.

akak's picture

No, PUD has just proven that all planning and preparation is futile, because an asteroid might extinguish all life on earth tomorrow.  His logic cannot be denied.

PUD's picture

Planning for a hurricane, blizzard, loss of power etc makes prudent sense. Planning with some idea that if civilization collapses you'll emerge fully intact and ready to take advantage is delusional.

Admit it, all of you "gold bugs' are engaged in nothing but the very same speculation for your own gain that every derivative, option, stock, bond, commodity wall st type that you hate is engaged in. 

The only difference is your fantazamagoric delusion that gold has magical properties that make it immune.

You are no different than the rest of the rabble you curse. you would love a dollar collapse, you would love any disaster that propels your shiny metal higher.

Babble all you want but just be honest will you?

akak's picture

In case you haven't yet noticed, YOU are the only one here harping about, and even suggesting the likelihood of, the complete and total collapse of civilization.

"False dichotomy" --- look it up.

PUD's picture

Oh, you're will just be a mini collapse, a micro devaluation, a tiny central bank insolvency...just the right goldilocks amount of doom to drive gold to 10,000 fiat ya! I stand corrected

akak's picture

Since you seem intent on repeating the same nonsense, allow me to repeat myself as well.

"False dichotomy" --- look it up.

caimen garou's picture

I see paul krugman changed his zh name, fool!

rayduh4life's picture

Yep, pretty much my sentiments as well.

PUD's picture

5 enlightened souls to 34 lords of the flies...about the right proportion of enlightened americans to dumbed down sheep

Lordflin's picture

Not so hard on Pud... sheep are sweet creatures really. I know, I own a flock of them.

PUD's picture

Why don't you use your words and articulate how your master plan unfolds? How you will rise above the starving masses to rein supreme with your little bag of shiny coins. Seriously, I'd like for any of you to think this through and detail you vision of the end game and how you're going to prosper while civilization crumbles...waiting

tenpanhandle's picture

let us play with our shiny coins and STFU!

Likstane's picture

Here's an idea.  Get yourself 3 of those little silver discs and hold them.  Clack them against each other and listen to the noise they make.  Take them to the shower with you.  Hold them while you take a dump.   Place them on the table next to you when you eat.  Put them in your pocket.  Rub them.  Make them shine.  Give one to your woman and have her carry it in her panties for awhile.  Take it back from her; hold it against your face.  Take a piece of paper and cover them; take your pencil and make a copy of them; isn't it beautiful?  Lick them-experience the metallic taste.  Put a small scratch in one just to see it.  Speak to them; isn't it nice to have some little silver friends?  I think you will soon be convinced of the wonderful comfort that comes with the shiny little tokens. 

Even if this technique doesn't convince you of the warmth and power of these magnificent little storages of value, you can still take them back to the coin shop and return them for those dirty rectangular IOU's generated by a corrupt representative of a worldwide Jewish banking cartel. 

Crabshacker's picture

HEY HEY, don't forget to wash your coins after ya poop!!

Likstane's picture

Yeah, good call...maybe I should have put shower after pooping. 

akak's picture

You're supposed to poop in the toilet, not in the shower.



Dieselclam's picture

Pud, I'll throw you your bone. In fact, from my perspective, you're an optimist when it comes to future living comditions. But while you wave the prophetic "I told you so" flag ahead of time, these PM speculators are preparing for eventualities they can sense but not see. You have simply given up. They want to live life to the fullest possible extent for as long as they can despite the situations, whereas you already have an exit plan for when things are intolerable for you. Ok. To each his own. Yeah, they are all "greedy preppers. Count me in with them because quitting in the starting blocks before the starter's gun fires is about as heart warming as premature ejaculation.

20834A's picture

PUD, First let me say your vision of things is very dark and full of despair. If the 'end of the world as we know it' (TOETAWAKI) happens to such an extreme degree as you anticipate, I hope you find your quick and painless end. But as for me, I have to face even that extreme with some degree of stolid fortitude. I'm assuming you're not positing the end of the human race? If not, then there WILL be survivors who are left to rebuild. Maybe my 'planning' will not see me and mine through, or just maybe it will. But doing nothing ensures failure and death to my grandchildren, to whom I owe my protection.

Easy times in history always end. Indeed, human history is a long timeline of grind rather than glory. You think it can't be borne, but it can, and has been, and is. What your really saying is that YOU can't bear it. So be it. But look at the Amish/Mennonites. They are doing without most of the modern conveniences right now, and they're doing fine. With skills, agricultural assets, community, and an improvising mindset, and (yes) some gold coins to rebuild markets, the human race will carry on without you.

agent default's picture

"I think you all watch too many fantasy video games."

I think you live in one.

optimator's picture

So, where do you put your savings to keep them safe and growing?  Folks with gold may not be able to do anything with it, but their heirs will be very rich in future, just like those that hung onto it when FDR wanted to take it for $30 an oz.

boooyaaaah's picture

I am where you are, if FDR made owning gold illegal why wouldn't OBEWON

The Rebubs may protest and negotiate that 2 onces are legal

But still who is going to buy your 2 ounces

The only chance we have is re establishing the constitution


Big Corked Boots's picture

I have to believe that of the tonnage of Au being moved, that some of that metal is leased. And I have to believe that the lessee assumes the deal is permanent, i.e. there ain't no way China and India will ever give that gold back. China will keep it at the point of a gun and India will just paper the hell out of everyone who comes looking. 

I also have to believe that there are some good people remaining at central banks, who see the movement of metal, and are at a minimum going to blow the whistle and maybe just prevent this looting. Not everyone at the Fed is evil...

Well, I can hope. I'm gradually becoming my own central bank. Fuck 'em all.

Racer's picture

The price of gold in sterling hasn't changed that much unfortunately for anyone wanting a better price to buy

akak's picture

I didn't realize that the price of gold in sterling silver was a meaningful metric for anyone.


Oh, you mean the price of gold in UK pounds, right?

WmMcK's picture

The GSR is a very meaningful metric (for me, at least).

sudzee's picture

The local refiners are seeing about a 30% drop in Gold scrap and silver is down to a trickle. Buy prices on gold are up to 98.5% and 95% respectivly. Canadian mint is or has melted 200,000 $5 & 10 gold coin minted in years 1912-14.
Supply crunch time is upon us.

Smegley Wanxalot's picture

Sheesh, you people make it sound like we can't trust our Central Banks and politicians, or something.

savagegoose's picture

Does anyone recall why UK sold down the gold price?  its because they needed to deliver gold they had of someones. and geting that stack cheap is the best way. seems to me we have a repeat of browns bottom, but this time for germanys gold request.

malikai's picture

Brown wanted to get famous.

ekm's picture

Based on my observations, I think QE is dead. I'm expecting the Fed in march to signal the end of it.

There's nothing left to buy and own, nothing real or productive is left to trade. Stocks, commodities, houses are currently all owned by Gov+ CBs + Primary dealers/major world banks and placed in storage. Directly or indirectly the govs already own everything, no need to print more money.

Legally this is equal to expropriation, and a reminder to everybody, expropriation is legal in the western world.


We are left with two options:
Option 1 - one or two primary dealers/major world bank get pulverized (one or two of deutsche bank, merryll lynch, rbs or all 3)
Option 2 - wall street closes shop

I think option 1 is about to happen, extremely soon, extremely fast.

Meremortal's picture

Sorry, you are mistaken.

tenpanhandle's picture

Whew, thanks for that well fleshed out counter arguement.  I was scared for a moment there.

Kirk2NCC1701's picture

Actually, I worry about Option #3:  The NWO crowd can afford to lease the top brains & gear to play out tons of scenarios, i.e. how to play and stay in charge.  I suspect that we'll get neo-Feudalism, with The Usual Suspects (still) in charge, but now w/o the Constitution or Bill of Rights in their way. 

If we can 'prep', so can they.  Only better and in larger groups -- with more food, water, energy, tools, consumables, G+A and local-fiat based on PM.  Why do you think the Big Fish do not want the little fish to have big teeth (too much G+A)?  So Big Fish can eat little fish.  Welcome to the 1700-1800's.

You sure you want the current system to collapse?  Just asking, to provoke some Cognitive Dissonance and (hopefully!) some good discussion that does more than rehash old positions or lines.

ekm's picture

It is inevitable. Collapse is inevitable.


Anybody who preaches that Wall Street owns the government, must use their logic and think: How does wall street make money?


Answer: Trading income.


At S&P1500 nobody can afford to gamble. At S&P 400, everybody will gamble, hence good for wall street.


My forecast is S&P at 400 within 2014. If this continues a little bit longer, I may be tempted to reduce my forecast to S&P 150.

ekm's picture

Option 3 is possible also. I lived in communism so I know option 3 is death.

jackinrichmond's picture

i agree with jim sinclair - they will never, ever be able to stop QE

Room 101's picture

No, they won't stop QE voluntarily. But at a certain point there will be no other choice. 

Room 101's picture

You might end up being right. At a certain point, even the Fed will move off stuck on stupid. We might not live so long as to see it, but I think it will eventually happen. No organization seems to ever ever voluntarily gives up it's existence, and even the Fed has to realize that it's treading on thin ice.    

As for the implications of that, only time will tell.  I see your scenario 1 as being far more likely than scenario 2 for the same basic reason:  no organization seems to ever voluntarily gives up it's existence.

Edit: fuck you, bernanke. 

ekm's picture

The beauty of open ended QE is that it can be stopped at any time. There's no scheduling.