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hyperinflationSprott Global Resources Chairman Rick Rule joins The Doc & Eric Dubin this week to discuss: 

  • Platinum & palladium- is the run over, or is the real move to the upside yet to come? 
  • Rick discusses the “ugly set of circumstances” facing mining in South Africa, and the implications on the supply side for gold, silver, platinum, and palladium over the next few years
  • Why water will be the investment story of the next decade
  • Rule discusses the pernicious devaluation of the dollar over the past 30 years, and predicts that the impact of the shift in global trade settlement & savings from dollars even slightly (1%) into gold will result in a 100% move in the valuation of gold. 
  • Rick also provides his outlook for precious metals in the face of continued manipulation, and states: “In my 30 years of experience in the markets, I’ve seen alot of manipulations, and the markets always, ALWAYS win.”

The MUST LISTEN SD Weekly Metals & Markets with Sprott Global Resources Chairman Rick Rule is below: 

 

REVOLUTION

 

gold - jun 27 - 2014

 

silver june 27 - 2014

 

Precious metals performed well this week, all things considered.  Next Monday will market the end of the quarter.  Historically, precious metals usually come under cartel attack with end-of-quarter window dressing.  But we even managed to get through silver options expiration without too much downside action.  Both gold and silver consolidated this week, as I cautioned on last week’s show.  But Wednesday, not Tuesday, turned out to be the day where cartel capping was most visible, following the pattern I discussed last week as weakness began during London’s morning session and culminated with a smash timed to the COMEX open.

Precious metals quickly regained lost ground.  Even though silver was attacked during Friday’s afterhours trade and we will likely see further capping on Monday timed to match the end of the quarter, the set-up for an explosive July remains.

Rick_Rule-315x180

It was a pleasure to speak to Rick Rule today.  Platinum and palladium have enjoyed large percentage gains in the last few months.  Rule continues to believe the PGM complex offers outstanding risk/reward for investors.  Given that he just returned from South Africa we spent a portion of the show getting his most up-to-date view on PGM trends.

Long-time precious metals investors will also appreciate my asking Rule to explain in more detail where he stands on the subject of precious metals manipulation – specifically, the magnitude and frequency of manipulation.  To better place Rule’s view in context, we asked if he believes manipulation happens at least on a weekly basis in the precious metals markets.  Tune in for his answer.

Chinese Gold Warehouse Receipt Hypothecation/Rehypothecation

Bloomberg News reported on Thursday that China’s chief auditor discovered 94.4 billion yuan ($15.2 billion) of loans directly linked to falsified gold transactions, drawing more speculation of possible fraud in commodities financing deals.  Fear over the potential for excessive leverage given extensive gold rehypothecation has been casting a shadow over the precious metals market for nearly a year now.  I’ve maintained all along that this story is overblown, and Thursday’s report supports my thesis even though the situation is no doubt worse than what is being reported.

Goldman Sachs estimates the total amount of shadow banking system borrowing backed by base metals including copper and aluminum and precious metals to be $160 billion.  Most of this financing is backed by copper and aluminum warehouse receipts.  Unlike base metals, gold in China moves rather quickly towards the official sector — China’s central bank and sovereign wealth fund holdings.  Furthermore, consumer end demand is so robust that it also tends to draw gold more quickly into the hands of strong, long-term savers and investors.  Robust Chinese physical demand makes the gold warehouse receipt an entirely different animal than copper or aluminum.

Even if we double the $15.2 billion figure, $30+ billion in the grand scheme of things is not a lot of money.  When the issue of insolvent trusts surfaced to front page news during the first quarter, China made it clear it would make speculators whole regardless of “moral hazard.”  China can deal with a $30 billion gold warehouse receipt lending black hole — even one that is inflated still further by rehypothecation, because backstopping imploding credit positions would most likely happen on an incremental, firm-by-firm basis over time.  That’s exactly what has been happening with China’s effort to paper over the problem with insolvent trust products.

I have argued for many months that this story is overblown.  Recently, Alasdair Macleod has been making the same argument.  We’re nearly alone among precious metals analysts, as best as I can tell.  Taking a contrarian position suits me just fine.

Have a great weekend! — Eric Dubin

 

 SD readers can meet and interact with Rick Rule in Vancouver, BC July 22-25 at
The Sprott Natural Resources Symposium 

  1. Very nice interview! I look forward to the ‘Weekly Metals and Markets’ feature.

    Mr. Rule made some pretty interesting points about the PGMs. When, as I expect, the unavoidable capitulation of governments and banks to re-institution of the metallic monetary scheme comes to pass, I’m pretty certain we’ll see those metals inserted at the top-end positions, much as resort was made to gemstones in the Renaissance period when particularly large settlements were negotiated, which left the prospect of temporarily exhausting stores of metals better kept for more mundane ‘overhead’ needs.

    Once that global coinage demand comes into play, pressure toward geologic ratios for valuation will become reasonable and long term savers of those metals will be terrifically rewarded.

    • Or the BIS wins the war against the ignorant minds of the unwashed masses and everything is propelled into a new world wide fiat paradigm where PM’s come crashing down in the paradigm war once again.
      But such a system could not last more than 10yrs or so even if it comes into existence in this multi-polar world (which I doubt as NY and London will never give up their beloved AngloAmerican Fed Fiat).
      I’m ready for another 10year wait if it comes to it … I have very strong hands, and materialize my fiat into storeables as soon as I get hold of any.

    • When I see a pic of Mr. Rule, I know how a chicken feels when the fox has just entered the coop and is sizing up a nice meal.  He’s probably OK.  Sprott must think so and he seems a decent enough fellow.  But… there’s just something about this guy that makes me uneasy… as if I want to grab my wallet and RUN!
       

    • @Ed_B  @WillNotBeASlave
      In all fairness, I did see a webcam video he put out, and I did actually get the feeling he was a much better person.
      It’s just that file photo we have here, or his standard camera face that is a bit off-putting I believe…
      All in good fun!

    • @undeRGRound
       
      I have seen a number of pics of this fellow and in all of them he has that smarmy foxy look about him.  Maybe that is the salesman in him?  I dunno.  I just know that I would not be interested in doing business with this fellow.  I do like hearing what he has to say, though.  I am a gatherer and sorter of info, so the more the better.  :-)
       
      @TheRedPill
       
      “Agreed……and upon closer scrutiny, it’s all in the eyes.”
       
      Yes, the eyes have it!  ;-)
       

    • Superficial is one thing but when one’s sense of financial preservation is tingling, that’s quite another.  I have learned to pay close attention to such tingles.  It can get damned expensive if I ignore them.
       

  2. Rick seems to be one of the best informed and most succesful PM/resource investors. His case for PGM’s seems more sound than anyone’s for silver. And the Palladium0Silver ratio already doubled the past year.
    What if we silver stackers transitioned half our silver into palladium…could the market handle that?
    It seems we cannot even drain SLV with our stacking. 

    Are we failing to take a lollypop from a child by ignoring palladium?

    I am in serious doubt. Am I “too late” with PGM? Rick doesn’t feel so. 

    • ULTIMATELY, Silver has the best upside potential of all, by far. In the interim, you may be correct, XC
      Platinum and Palladium were up ahead of Gold and Silver, and the 2011 moonshot left them behind. 
      They seem to be more “industrial” than even Silver. Catalytic Converters are BS, in reality. Not Needed
      on a warmed up engine, at all. They have the technology NOW to get by with one small pre-Cat for 
      cold starts. That would reduce PGM Industrial Demand by 75-90% IMO. Just another govt. induced bubble… 
       

    • I am not so sure the engines making smog in Asia all just had to be pre-warmed?

      Electric cars taking more market share, and eventually reducing the amount of gas cars may reduce PGM demand.
      What else makes silver look better in the long run? PGM is better suited for monetary application (as in value dense) and easier to deplete stockpiles.
      Why would we not take all the PGM’s in the orld, collectively, and make it a 20-bagger? Then we can do it with silver next.

  3. The fact that I can click on this web site and get valuable PM info 24/7 all for free is something I don’t take for granted. I remember back in 07 when I started trying to learn about investing in silver, there wasn’t much around that I could find. This site brings it all together and saves time for me with keeping up with the latest pm news. I unfortunately don’t have a lot of free time, so this is my goto site. So thanks Doc and Eric for another great interview. 

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