Billionaire Eric Sprott – Entities
Wiped Out Overnight As Western Central Banks Near Total Surrender
Feb 02,2015
Today billionaire Eric Sprott warned King
World News that as entities are being wiped out overnight, Western central
banks are nearing the point of total surrender. This interview takes a
trip down the rabbit hole of desperate central banks coming to the realization
that it’s nearly game over.
Eric Sprott: “I find it very
ironic that the most volatile asset class these days is currencies. This
seems very strange with global stock markets just treading water here.
Yet we have currencies that are flailing all over the place, including the
euro, yen, ruble, and the Canadian dollar. It strikes me that we are
living in a very bizarre financial world as the currency wars continue to rage
with various governments and central banks.
Eric, I’ve always wondered, how do we deal
with this one quadrillion dollars of derivatives? These are tied to
various instruments, including currencies. We already saw what happened
when the Swiss franc was revalued and companies went broke overnight….
“You have to wonder to yourself: How
are these banks positioned in these derivatives? We see this huge
volatility in currencies and a lot of it must be by way of derivatives.
Well, this was the problem with the foreign-exchange companies that were wiped out
overnight.
But there are derivative problems in the
price of oil, emerging markets, and bond markets. So you have to
wonder: How is that translating into the derivatives books of
these various banks? We have seen a lot of entities who have seen their financial
situation change violently in a very short period of time.”
Radical gold Revaluation?
Eric King: “It was interesting that
after the radical overnight revaluation of the Swiss franc that many people
began to discuss the possibility of this happening in the gold market at
some point — a radical overnight upside revaluation of the gold price.”
Sprott: “We have this massive
volatility in the currency markets and gold is a currency. Gold has
attracted a lot of attention here. Something like 84 percent of the
world’s population would have made money if they were invested in gold in the
past year. I think we can safely say that nearly 100 percent of the
world’s population would have made money if they owned gold in the month of
January.
Now there is fear breaking out in Europe
surrounding the stability of the euro and the banking system, especially in
light of the fact that the Greeks may default. This is causing people to
move into physical gold. Interestingly, we have seen a supposed increase
in the tonnage held by the ETF GLD. I think their so-called holdings of
gold have risen more than 40 tonnes this month.
If you start annualizing those numbers,
that’s a serious change in annual gold demand that wasn’t
anticipated. We already know looking at the Indian and Chinese data that
there is more demand than supply. This has put more pressure Western
central banks to supply that physical gold. If people start pouring
money into real physical gold trusts it will just make the strain on
Western central banks that much greater.
Game Over
To your point, Eric, that could cause a
cessation of Western central bank gold sales. The Western central
banks may just say, ‘OK, we’ve restricted it (the price of gold) for this long,
but now we are getting called on our gold. It’s over.’
Also of interest is the fact that there is
a huge open interest still outstanding on the Comex. It will be
interesting to see how many of those contracts stand for delivery this
Friday. These outstanding contracts are way bigger than the entire
inventory at the Comex.
It’s also kind of wild that the type of
trading we see in China on a weekly basis is way bigger than the entire dealer
inventory on the Comex. You wonder how long can these guys (Western
central banks) keep this up (the price suppression scheme)?
The physical
demand just won’t let up at these depressed prices, and when you throw in a
massive currency war that is taking place on a global basis, it is only making
matters worse for the Western central banks.
Collapse Of Price Suppression Scheme
I wrote an article in 2012 asking, ‘Do the
Western central banks have any gold left?’ The reason I asked that
question is because I could see all of this demand and I kept wondering:
How long can these guys keep this up with their supplies of gold dwindling?
Then in 2013 they drained 850 tonnes of
gold out of the various gold trusts and ETFs. With a 4,000 ton a year
market, this was a significant increase in supply. Perhaps that took care
of the shortfall in 2013 but in 2014 they hemorrhaged even more gold out of
Western central bank vaults.
Well, here we are in 2015 and we are
hearing more and more about gold repatriations. So when does
the day of reckoning come? When that day comes it will mark the breakdown
of this latest scheme, just like the collapse of the London Gold Pool in
the 1960s. I don’t think they will wait until the last bar of gold is
gone from Western vaults, so the collapse of this latest suppression scheme
could happen any day.
Western Central Banks To Finally Surrender
The flow of gold continues from West to
East in large quantities. If the Indians end the import duties on gold
that could create another tidal wave of demand. This would force the
Western central banks to wave the surrender flag. You certainly get a sense
that day is nearing, Eric, when you look at the continued strong bid in the
gold market, even as the price of oil and other commodities have
collapsed.”
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