Director of the Gold Anti-Trust Action Committee (GATA) Ed Steer sat down recently with Larisa Sprott of Sprott Money News (SMN) to discuss the gold and silver markets, central bank purchases of gold.
We've got the highlights for you here.
Gold and silver markets:
Well, I think, you know, after the long “consolidation” we’ve had in the gold and silver prices for the last couple of years, lots of investors are getting nervous and worried about it. And, of course, you know, everybody’s talking about it, and I can’t say I blame them. And this endless gold supply is, a lot of it is just paper trading on the futures market and in the commodity exchange of New York, and it’s not indicative of true world supply and demand. And of course we’ve had that “usual suspects” manipulating the prices of the precious metals for decades now. This is nothing new.
But as far as the next run in the bull market is concerned, I’m expecting it anytime, because we, this big $120 price drop, or whatever it was, in the last month or so of trading was all paper on the COMEX. Nothing really happened in the physical market to warrant a sell-off of that proportion. But as you said in your question, the usual suspects can do pretty much what they want in the paper market. Of course, what happens in the COMEX’s futures market directly affects the price.
So I think that, as far as I’m concerned, we’re getting very close to the bottom of this move down, and I’m expecting the next move up to be certainly within the next few weeks or months, rather than having to wait another year or so. I don’t think that’s in the cards at all.
Nobody knows what the true free market price of gold and silver is, because it’s always been managed by the government or by the banking industry, and nobody knows what it is. And how far we are away from a free market price is anybody’s guess. Your reader is absolutely correct that the price of silver is hugely managed on the COMEX’s futures market, and it’s no secret on the Internet that the principal culprit in this is J.P. Morgan Chase. And then there’s a couple of other banks, but most of this price management scheme is just by two or three banks, and most of them are in the United States.
But as far as how high the price is going to go, you tell me what J.P. Morgan is doing at the end of this year vis a vis their activities in the gold market or the silver market, on the futures market, and I’ll tell you what the prices are going to be. If they’re still there, actively involved in the market, I would say we’re certainly not going to be going much above $1900 in gold and above $50 in silver. But if they decide that it’s time to step back and let the prices run, well, the sky’s pretty much the limit. And, like I said before, I think it will come suddenly rather than over a long period of time.
I think [regarding] the 2% rise [of the gold price over the past couple days], people are saying that Ben Bernanke opened his mouth yesterday or, yeah, yesterday, and said something to the fact that, no, we’re not going to be curbing quantitative easing, and we’re going to continue printing money, and this was a short covering rally in reaction to that. And I wouldn’t bet the ranch on it. It looks like it might’ve been in gold, but it’s hard to say in silver. And everybody’s just speculating on whether that was the case or not. But whatever it was, it drove the price up very quickly. But I’m just looking at the charts right now here. On Wednesday, around lunchtime, Edmonton time, and the gold and silver prices are back below where they were 48 hours ago. So whatever gains we had on Tuesday have all been given back as of today.
You know, [the US Mint sales of silver eagles] is one thing, of course, that I watch on a daily basis and report in my column at Casey Research at a daily basis. What’s going on at the US Mint. Because they report their silver and gold eagle sales on a daily basis. And as of yesterday’s production, they were up to 3.36 million ounce, million silver eagles produced within the month of February. Considering the fact that there’s only 28 days, that’s an amazing number. So I can tell you right now that the mint in the US is going flat out in production of silver eagles at the moment.
And of course, the gold eagles are no slouch either. But what people are discovering is that silver’s in short supply, and the Americans have been buying these things with both hands, and good on them.
Central bank gold purchasing:
What happened to Canada’s gold under the Brian Mulroney era [is] just too long and complicated to go into on this show. But what I can say is that, you know, all questions like that, as to how much gold Canada should have, should be directed to the Department of Finance in Ottawa, because they’re the ones that ultimately determine whether or not Canada will have gold reserves, and if so, how much. And as far as I’m concerned, Canada should be rebuilding its gold reserves, and it should have been doing it for years, and it’s not doing that.
I read an op-ed piece in the National Post, I think it was about three weeks ago, that Conrad Black wrote telling the Canadian government they should be doing exactly the same thing. So there’s lots of people, from the great to the not so great, that figure that Canada should be taking some of their paper currencies and putting it into the gold market, or into the gold, into buying gold to back Canada’s dollar, or to have some sort of reserves in hard assets. But the Canadian government, for whatever reason, is not listening, and it’s really a shame, because at one time Canada had 640 tons of the stuff at, you know, in stuck,
Gold has basically become the de facto currency, de facto money. It’s always been money. Silver’s always been money. Gold’s always been money, and the fact that the central banks, especially some of the smaller central banks. You know, like Mexico and Afghanistan and all these places; smaller countries that are sort of beyond the Western sphere of influence of central banking. They’re buying this stuff up, and for very good reason. If I was a central bank in some small country, whether it be Argentina or Chile or Peru or whatever, I’d be taking my foreign reserves and I’d be plowing it into the precious metals and keeping it in my bank in my own country where I keep an eye on it. And this little trickle has become a flood over the last five years, and I think that as time goes by, you’re going to see more and more of it.
And I see there was a story about Mexico’s bank requiring that they come up with some sort of official proof that they actually own this gold that they bought a couple of years back, and that’s also getting very interesting.
To read the interview in full, click here:
Source: Sprott Money