Eric Sprott: ‘Fear the Financial System’

The Gold Report has released an excellent interview with our friend Eric Sprott of Sprott Asset Management.
Sprott states it is time to “Fear the financial system.” and that it’s time for people to take matters into their own hands by purchasing physical gold and silver.
Sprott discusses the massive 2,500 ton demand change for gold over the past 12 years, in a 4,000 ton/year gold market, and states ‘you have to ask yourself where all that gold is coming from!
Sprott believes (likely correctly) that I can only conclude that acting in concert, the G6 central banks are supplying that gold from their reserves by leasing the central bank gold into the gold market.

Sprott also states that if they were not manipulated, the price of gold today would be over $3,200, and silver would be north of $200/oz.

The Gold Report: You’ve stated before that the price of gold should be above $3,200/ounce (oz) and the price of silver above $200/oz but market manipulation keeps both metals artificially low. Who is manipulating it?

Eric Sprott: I suspect the G6 central banks have a hand in subverting the gold price because as the canary in the coal mine, high gold prices might tip everyone off to the severity of the ongoing financial crisis. I don’t think anyone can doubt that we’re in the middle of a financial crisis, primarily in the banking system, when month after month one program after another is rolled out to save somebody, whether it’s Long-Term Refinancing Operations (LTROs), quantitative easings (QEs), bank bailouts in Spain or rollovers of debt in Greece.

TGR: Are you saying that the gold price manipulation is a new phenomenon?

ES: In the 1960s, the London Gold Pool was trying to suppress the price of gold but lost that battle, and the price rocketed up. My own analysis of the physical supply and demand for gold suggests a dramatic increase in demand over the last 12 years—a 2,500 ton net change at a minimum. This is in the 4,000 ton/year gold market, which hasn’t increased in the past 12 years. The supply has basically been static. Yet we have exchange traded funds and central banks buying. You have to ask yourself where all the gold’s coming from with all these new sources of demand, because mine supply over that period is negligible.

I can only conclude that acting in concert, the G6 central banks are supplying that gold from their reserves by leasing the central bank gold into the gold market. Of course, they pretend they still own it, because the item on their balance sheet is now called “gold and gold receivables.” The receivable is what they’ve loaned to a bullion bank, but it’s actually been sold into the market and consumed and won’t be coming back again. To buy it back physically would drive the price absolutely crazy.

That’s why I think the price of gold should be considerably higher than it is, and why I believe, much as anyone in the Gold Anti-Trust Action (GATA) organization, that there’s been continual pressure from the central banks in cooperation with bullion banks to keep the price down.

TGR: Does the fact that the silver market is so much smaller than the gold market make it easier to manipulate?
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