The Doc sat down with Sprott Asset Management’s Eric Sprott this weekend to discuss the European debt contagion, the latest gold and silver massacre, the massive rush into physical metals, and his outlook on gold and silver for the rest of 2012 and beyond.
This is a portion of Eric’s thoughts regarding Thursday’s smash in the metals and the crisis in Spain coming to a head.
SilverDoctors’ explosive full audio interview with Eric Sprott is AVAILABLE NOW HERE!
When asked whether Thursday’s gold and silver raid coinciding with Bernanke’s testimony to Congress felt like Deja-Vu to the Leap Day Massacre Eric responded:
It might be that the silver cartels have changed their MO. The MO used to be that whenever the jobs number came out they’d go to work , which let them take a shot at the markets once a month.
The last jobs report backfired, and of course the jobs reports have been so poor. I think the key thing for the cartel is to time it, and to know when to do it. Three or four guys acting together can have a bigger impact if you all know exactly what second we’re going to do something.
Of course Bernanke releasing his comments at exactly 10am is the perfect time. Ok, let’s knock gold and silver down. It theoretically make’s Ben’s remarks seem all the more important, although you see the action in the market before anyone’s even had a chance to read his comments, but it sort of reinforces it.
I would not be surprised that the MO has changed, and now we do these things when Bernanke speaks or when the Fed announcements come out at 2:15 on June 20th next, that’s when they’ll act. They like to know when they have a common time when they can all go into shorting mode.
To me, there’s been no reason for precious metals to be weak here. All of the data is incredibly positive for precious metals. I focus on gold because the silver data is so poor that we get, but when you see China buying 100 tons of gold in April, Iran’s buying, Turkey’s buying…Kazakhstan announces they’re going to go from 12% of reserves in gold to 15%- all of the data speaks to HUGE VOLUMES OF PHYSICAL GOLD BEING CONSUMED…way beyond the ability of the miners to provide that gold.
Which makes me think the central banks are continuing to lease or to supply the gold into the market somehow…normally through leasing because then they don’t have to sold it.
All of the physical data says that gold is a buy. All of the financial goings on suggest that gold is a buy, but for some odd reason, and of course to me the odd reason is the central planners of the world don’t like the price of gold going up. The central planners to their demise think they know how to run the world. They’ve proven in the last five years THEY DON’T, because they never solve a problem!
Of course gold and particularly silver being in such short supply will be massive beneficiaries when all of a sudden people realize that there’s not as much gold around as people think. Of course the silver supply would disappear in a nanosecond because it’s a very small amount of money.
When asked whether central banks were in danger of falling behind the curve, and will need to announce massive new stimulus to stop the deflationary momentum, Eric responded:
The ECB is WAY behind the curve here. Because the Euro area is quite dysfunctional and you can’t get agreement among 17 groups and of course there is different interests of the stronger countries vs. the weaker countries- I think they’ve been way behind the curve in dealing with the problem that they have.
Fortunately in the US where there’s one central bank and one huge printing operation it’s easier for them to deal with the problem because they can literally do whatever they want- as we’ve seen them do on many other occasions. The Fed getting behind the curve may be them getting Europe to solve it’s problems. There have been Americans that went over to Europe to try to encourage them within the last week, and Obama was on the phone to encourage them to deal with the problems, and here we have the weekend meetings, and undoubtedly they’ll come up with some promise of something, whether or not it alleviates the ongoing bank run we’ll have to wait and see.
The problem is WAY BIGGER than central banks can deal with, and its way bigger than governments can deal with- the whole banking community is massively larger than countries. The countries of course have no excess funds anyways because they’re all running deficits, so it’s very difficult for the countries to lean in there and bail them out when their own credit is under attack!
Spain just got downgraded by 3 notches by Fitch, so what are they going to do? They can’t go in and say we’re going to put €100 billion in our banks- their bonds would probably go through 10% so fast you wouldn’t know what happened!
It’s a mess, everyone’s behind the curve, and I don’t think they’ll get in front of the curve quite frankly. Extending and pretending, program after program, and when the program ends, the markets always go down. Then they come out with another program, the market goes up, and everyone is anticipating we’re going to have stimulus, the market’s going to go up…but ultimately, there’s NO IMPACT ON THE ECONOMY, BECAUSE THEY KEEP BAILING OUT THE FINANCIAL SYSTEM, NOT THE ECONOMY!! It’s the economy that’s languishing here.