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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Bicycle Repairman's picture

Martensen and Sprott seem frustrated that they cannot get accurate info on the "bottom-line" amount of gold holdings.

Whether it's gold or oil or the # of nukes in Israel, information is power and they're not sharing it.

eddiebe's picture

Blah blah blah blah.
We've heard it all before ad nauseum. Still the saying goes: Show me the money. And: money talks.

Until it is firmly established that Gold is money and fiat is fiat, all the jawbowning is just so much more bullshit.

tenpanhandle's picture

Sprott does put his money where his mouth is.

Bicycle Repairman's picture

Martensen and Sprott seem concerned that the COMEX and the CFTC will break the "rules" to thwart this "market".  No need for concern.  Just relax and know they will.

Lordflin's picture

China and Russia horde the gold and silver, US hordes the military... anyone wonder where this is going?

Meremortal's picture

 Give me a good military and acquiring and/or keeping gold won't be a problem.

Meremortal's picture

Give me gold and I'll need a military to protect it anyway.


Herdee's picture

Sprott Gold: PHY.U , Sprott Silver: PHS.U , Sprott Plat.& Pall.: PPT.U (Toronto),Americans can easily buy and store with Sprott in Canada(friendly,good neighbors to the north).Minimal effort,good website.Whatever you do,don't store your bullion inside of and/or with(in any form)an American banking institution.Your gold as we know can be confiscated by the Federal Reserve and/or the U.S. Federal Government.(no I'm not kidding,it's happened before!)


Acidtest Dummy's picture

When fraud is the rule, possesion is the law. Nothing is easier to store than Au, nothing. Why hire counter-party risk? If confiscation is coming the big piles will be confiscated first. If you don't hold it you don't own it (and if it is too much for you to carry, you don't deserve it.)


Kirk2NCC1701's picture

Well, Canada is part of the British Commonwealth, and the 'Crown' (The 'City', not the Queen is the 'Crown') does own lots of Crown Land in Canada, with which to back up its fiat, should they so choose.  Even if the UK goes bankrupt, the City/Crown does not!  Food for thought.

And if those people who claim that The City is owned by the R family are right, and that they are the dominant shareholder of the Fed, then the POTUS & Co will not and cannot touch Canada.  IF the R-theory regarding The City and The Fed is correct.  More food for thought.

disabledvet's picture

I thought we didn't have any to begin with...

Meremortal's picture

"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."



By that logic, real estate and oil/gas should benefit too. And that's happening. Collectibles and used articles like musical instruments are still down. Maybe time to invest there...

q99x2's picture

Fuck ya the bansters are moving the US gold reserves.

I call for the States to file suit against the US Federal Gov't to sue for damages and a full independent accounting of the States collective gold which is held by the Feds.

If its missing send the banksters to hell.

Meremortal's picture

I'm sure the States will get right on that for you.

Bansters-in-my- feces's picture


Have you picked up your goverment issue drone recieving signal transmitter yet?

If not it is in the mail.

savagegoose's picture

I suggest that  obama   sends out  cyanide pills, for EVERYONE.  as part of the next stimulus package.

tony bonn's picture

the public figures bandied about as gold imports for china and india are ludicrously and naively low....every drop in gold price is a raiding opportunity for the chicoms....the tonnage of gold transferred east should be measured in the thousands and tens of thousands of tons.....

see jim willie for greater details.

Absalon's picture

Why is the writer talking about Canada?  Canada sold almost all its gold reserves transparently a long time ago.

The Heart's picture

THIS! the opposite of dishonoring.

We the heart of America want to express great thanks and gratitude for this man that stands up to speak his truth like this. We have prayed hard and long waited for good men, and women to stand tall in the Light of Truth against the beast that seeks to kill us all off. a world-wide issue and people must wake up to see who the real enemies are.

Give ya a hint, they call money, god.


TNTARG's picture

Beautiful. I loved that principle "live and let live". I'll stand with you for it to be granted to every person on this Planet.

The Heart's picture

Totally misread this title earlier!

Meatballs's picture

Just love that reference in the first para to Central Bankers having hearts. Lost me right there.

Stuck on Zero's picture

We're not just losing soverign PMs.  We're losing technology, factories, jobs, and all forms of value to the mercantilists.  Soon we'll be losing our food, fuel and women!


No Euros please we're British's picture

Don't know what the fuss is about, there's plenty of paper gold and silver and the paper miners can ramp up production at any time. The Russians and Chinese will look pretty stupid when they find out how much paper the Fed have stored away in Fort Knox and they only have lumps of yellow metal that scratches your arse when you wipe it.

JimmyCDN's picture

For Canada, the damage has already been done in the Mulroney years:


q99x2's picture

It is reasonable to think that the bankster's printing is foolish and will end in catastrophy. It is reasonable to think that gold is being sold from US Reserves. It is reasonable to think the price of gold and silver will increase when the physical supply has reached it's limits.

My point is that the banksters that are manipulating prices and selling US Gold Reserves are the same ones behind killing 450,000 children for no reasonable reason and that if you think they are going to allow non-banksters to profit from an increase in the price of gold and silver then you are not being reasonable. They will kill millions of Americans before they let that happen. That's the way they work. They are banksters.

falak pema's picture

TBTF Banks had to know what I had done :Madoff to FBN: Maintain Scrutiny on Banks and Feeder Funds | Fox Business

Damning Madoff testmony in email to Fox.

Monedas's picture

If it cost the US Mint 2 cents to make a zinc penny and 10 cents to make a nickle .... how much does it cost them to make an ASE ? These are $500 toilet seat, $150 hammer people .... come on .... government shiny coins are HEAVILY subsidized .... premiums are limited because of competition .... buy the fuck out of them !  It's a no brainer ! Think of the extra handling involved producing .99999 (five nine) coins .... ????

Room 101's picture

Not much.  Except for the value of the metal content, there isn't much difference in striking an ASE than striking a pot metal commemorative.  

Edit: Fuck you very much, bernanke.

Peter Pan's picture

I might have been inclined to accept a 10% decline in the price of gold in the last 12 months had the dollar also fallen by that percentage.

Given that the dollar has not fallen by 10% and given the worsening situation in the real economy, you realise it is all a load of crap given that the Dow Jones keeps going up without any justification other than what they are feeding it with behind the scenes.

are we there yet's picture

Tagart is right, but ZH'ers already knew Gold is shifting to China, India. There is not a single asset that congress has access to that in the past it has not depleted or ponzied out secretly if they can. The fierce secrecy over not auditing the FED is for an obvious reason.

ebworthen's picture

So this means I'm a Patriot because as a U.S. Citizen I am buying Gold and Silver, correct?

Yen Cross's picture

  The "west" has squandered all it's intellectual property, human capital, and sovereign wealth.  The west is in it's last "death throws", and in denial. That fucktard Bernanke could be standing over the bottomless pit to hell, and still looking for a bottle of green ink!

rawsienna's picture

I am about to do some work on my house that will cost me about 42k.   Was just thinking would my contractor take 3 of my 10 ounce gold bars as payment in lieu of cash?  Think he will take it?  Despite my continued preference to hold a decent amount of physical gold - I do think all central banks are fucked up -- I am not so sure he would (despite the value being well over 45k).  Two years ago, I bought an apartment in FLorida for my aunt (70 years old and broke) in a nice community for 52k -  3.5 10 ounce bars of gold for a 1200 sg foot apartment with a pool. Something is wrong - makes me nervous.  

tempo's picture

50 years ago, 6% of the population dependented on some form of government assistance, now its 35%. How high can it go??

Yen Cross's picture

  35%? ^  Almost 50mm people alone are on the Government dole. Then you can add  student loans, healthcare, and other forms of assistance to that 50mm. (I'm excluding Medicare and S.S. and defunct unfundable pensions, fraud, ect..)

 Roughly 330mm people live in the United States. I would say conservatively that number is over 50%. I'm not some dipshit "bean counter" though.

flyonmywall's picture

I doubt Sprott's numbers. More likely, central banks are basically pushing paper around, just like everybody else. No real banker right now is stupid enough to actually sell real gold, unless they think they can replace it down the line at a much cheaper price.

And there you have the crux of the argument for gold price suppression. The question is, who is ultimately right, the ones acquiring the real asset, or the ones supressing the price of the real asset thinking they can get it cheaper later?

If you look at the relative size of the paper market, the answer is clear. If you look at the overall performance of gold over the past 10 years, the answer is less clear. Welcome to muddy waters !



Clint Liquor's picture

"No real banker right now is stupid enough to actually sell real gold"


You give them far too much credit, in fact;

The only thing you can be positive of is that Central Planners will be arrogant and stupid. It's part of the job description.

Bansters-in-my- feces's picture

Replace the word "irrisponsible " with criminal and the word
"suppressed" with central manipulation,and you got yourself an article.
Ps...fuck you benny.

devo's picture

His best point is that they're suppressing gold to keep the inflation perception low. Spot on. The anti-gold campaign is in full force--people should ask themselves why.

HellFish's picture

If there was ever a need for an ignore button PUD sets the standard.

bigkahuna's picture

People trying to interpret this stuff? Here is a perspective from a guy who asks the question: what do I do with this?

Stock up on beans, bullets and brass. Network. Buy the gold if you think you you are well enough provisioned and secure enough to make it.

dolph9's picture

The West thinks it's far too advanced for that barbarous relic.

After all when you have unlimited debt money, you can wage endless wars and keep feeding the blacks and patting yourselves on the back for how powerful and noble you are.

chindit13's picture

Logic built upon a possibly false assumption is not logic; it is merely a convoluted confirmation bias.

The view that gold will always have special value because it has always had special value is a belief, even a tautology, not an absolute.  No matter the length of its record, it is subject to change.  Is it possible the West has outgrown gold, while the East maintains the superstition?

As one who tries to take CogDis’ advice and forever questions assumptions, a few things struck me about humanity’s supposed belief in gold.  The first is that it is quite possible that the value of gold in 1999-2000 was the lowest price the metal ever had in the history of the human species.  Though it is difficult to determine with certainty, one simple example suggests something not gold positive was going on.  Consider back in the early 1920s.  If one wished to buy one of Henry Ford’s cars, it might have “cost” thirty ounces of gold.  In 1999, if one wished to buy the average model from the company he founded, it would have cost 60-70 ounces of gold.

Was that an aberration, a long cyclic low, or an indication that humanity is outgrowing the belief that an otherwise useless shiny metal has some special value?  I don’t know, but neither does anyone else, Eric Sprott included.

The second thing that got me thinking was a visit to a farm in southern India that supposedly has been producing for five thousand years.  I considered a hypothetical case:  Two men, 5000 years ago, one who acquired the farm, the other who acquired the equivalent purchase price in gold.  Over the next 5000 years, the farm produced food that people ate.  It produced food that the owners sold, enabling them to acquire other necessities or desires with the proceeds.  The farm employed people who earned a living that enabled them to buy necessities and desires.  The gold just sat there.  It is likely the farm threw off major multiples of its purchase price in “earnings”, and it is likely even the residual value of the farm exceeds the residual value of the gold, forgetting the five thousand years of production and employment.

Today an investor has far more asset choices than at any time in human history.  In the past, only the “elite” had a wide range of asset choices, and even their choices paled in comparison to what is available today.  People without choices, or those who exhausted all other possibilities, chose gold.  Today, the historical 99% has choices previously unimagined, such as being able to buy a piece of an ongoing concern---or tens of thousands of them in equity markets worldwide---that throws off dividends and allows for capital gains as the underlying business captures retained earnings.  These entities also employ human beings, which has a multiplier effect in incentivizing society.  The 99% can also loan money to the same entities or even its government.  Ownership of real estate, too, has never been easier for the 99%, who historically may not even have owned the land on which they farmed.  Add to this the  ”toys” that modern society produces, and anyone, whether a 1%er or a 99%er, has choices that simply did not exist during the long period when gold held some special value.  

Gold just sits.  It doesn’t grow, it doesn’t throw off dividends or earnings, and it doesn’t employ anyone. It requires an ongoing belief to hold its value, as previous believers pass away.  Belief in the value of food and shelter is unlikely to ever become an anachronism, it is inherent and integral to survival.  It is not an acquired taste.  The belief in a shiny metal, however, requires socialization, just as it does for fiat.  Both have worked historically, and despite the predictions of its demise, there are more fiat in use in the world today than ever, some 180 different examples being used day in and day out by seven billion people. Even when fiat failed---especially in its most famous recent instance in Weimar---it was merely replaced by another fiat.  That is belief, and it seems humanity can be made to believe most anything, no matter how foolish it might seem.  That gold is not infinite merely places the belief in it nearby fiat on a spectrum of absolute to faith.

Very large scale holders of gold might have considered these same things; in fact, many did.  The much-hated Warren Buffett wrote a famous company letter where he compared alternative assets to the entire world’s stock of gold (though gold was $180 per ounce higher when he wrote his letter), and considered a hypothetical investor faced with a choice of owning all the world’s gold or its equivalent value in productive assets.  If one figures Buffett’s own wealth, he personally has a choice of buying ongoing concerns that employ people and throw off wealth (like Heinz), or a ten foot cube of gold.  Which would give him more personal satisfaction in his declining years?

One thing is certain over the last decade.  While gold has increased in value, the 1% has been on a buying spree of other assets unprecedented since the days of serfdom.  Sure, many of the 1% loaded up on gold in 1999-2005, though more likely as a trade, since it seems they are selling now---and loading up on land and buildings and natural resources and pieces of companies.  Asset ownership is shifting toward, not away from, the elite.  Investment funds that buy foreclosures or farmland are just the latest examples of this trend.  Even in a Great Reset, somebody is going to make a profit producing goods and services and it would be worth sharing in that profitability if one could do it.

So who is buying gold today?  Retail, for one.  China and India for another, including the Central Banks of those lands.  Are these groups the world’s “smart money”?  India may well have always been the world’s largest holder of gold, even back 5000 years ago when that southern India farm went into production.  What has it done for them?  The land has been invaded and colonized repeatedly throughout its history.  It suffered horrific ethnic tensions that saw it split into three separate modern nations, and it may well further split in the future.  More of its citizens today own gold than have access to modern sanitation.  The entire nation, whose modern population exceeds 1.2 billion, has been largely absent from the march of human innovation and discovery for hundreds of years (as has China).  It doesn’t seem as if its gold held any magical properties that did a lick of good for it.

If one was to doff a tin foil cap for a minute, it is possible that the great bull run in gold since 1999 is merely The Great Distribution?  Did the elite generational holders of the metal just devise the greatest pump and dump in the history of the world?  Has the real "manipulation" been to the upside, and the big "paper" sales are really hedging generational physical holdings?  The mind shudders to think.  As they say about poker, if you don’t know who the chump at the table is….

Years ago, about the time he predicted $1650 per ounce, Jim Sinclair said that one will know the bull run is over when Central Banks start buying.  China and India?

All of the above is just a thought experiment, and the belief in gold may survive and grow.  That's a bet, though, so it is fair to call it what it is.  It’s right to challenge our biases and assumptions, right CogDis?

devo's picture

Right, it doesn't produce income, but if you believe income producing assets are overvalued and will collapse while currencies simultaneously lose value, you hold gold and wait for repricing. If you're wrong you're screwed. Also, some people hold it as insurance. Not every asset produces income--that's not the benchmark for a good asset.

akak's picture

You are exactly correct, Devo, and the "it just sits there" argument against gold is as idiotic as declaring that lifeboats and fire extinguishers are useless because 99+% of the time they "just sit there" as well --- that is, until they are desperately needed.  The illogic behind such arguments is self-evident, yet they continue to be made (not saying that you are necessarily doing so, Chindit, as I can clearly see that you are merely restating such arguments above in the presumed role of Devil's advocate).

I dare say that more than 90% of those who currently advocate on behalf of owning gold in this forum, or who actually own gold today, did not own much if any gold 20 or 25 years ago, and that would not have been an irrational action on there part at the time, nor does it make them a hypocrite now or then, simply because a looming financial and monetary collapse, and the utterly insane levels of indebtedness of most governments, did not exist 20 or 25 years ago either.

devo's picture

I think people who say "it just sits there" are paraphrasing Warren Buffet, who has everything to gain from having people in other assets. Most people have dollars 'just sitting' in their bank accounts, so why not convert them to something intrinsic that can't be inflated away, as the dollar continues on the path to purchasing nothing? To have rainy day/nest egg money in dollars is terrifying. The anti gold shills can never give a good answer to that. Buffet did admit he'd rather own gold than dollars, though. That implies Warren has a lot of gold.