We Have a Shortage of Gold-Eric Sprott
What a great interview of Eric Sprott by Greg Hunter. Eric has a way of speaking which is clear, concise, straight to the point and so easy to understand for anyone with an open mind and 8th grade education. Back in early October he wrote a piece titled “Do the Central Banks have any Gold left?”
The bottom line is that they (Sprott Asset Management) have identified a nearly 2,300 ton per year increase in annual demand since the year 2000. Please keep in mind that back then, supply and demand figures as per Frank Veneroso were roughly a global supply of 2,500 tons and a demand of 4,000 tons per year. Part of this gap was “plugged up” by scrap retrieval but surely not the entire deficit. Now, as the additional demand has been steadily kicking in over the last several years, the supply deficit has blown out to something over 3,000 tons per year.
It does not take a rocket scientist to figure out the math here. “Supposedly” the central banks have 32,000 tons of Gold, the problem with this “official” number is that it does not address dis hoarding that has obviously taken place. If you take a 1,500 ton deficit from the year 2000 (this deficit existed prior to this) and carry it out for 10 years, 15,000 tons had to come from somewhere. If Eric Sprott’s demand numbers are correct (I believe they are) then we must add another 2,500 ton deficit for at least a couple of years coming to another 5,000 tons. This totals AT LEAST 20,000 tons of deficit in 12 years and represents roughly 60% of all “supposed” central bank Gold. Now the question begs, was the deficit “funded” by central bank Gold or from another source? I am not aware of ANY other source that could bleed 20,000 tons of Gold into the market over the last decade plus, besides, just WHO would have motive to sell? And just WHO would have motive to sell in the sloppy manner we have become so accustomed to seeing, other than central banks in an effort to portray “paper=good… Gold=bad?”
Another point brought up by Sprott is whether or not the Gold reserves have been swapped out or leased which would not affect the “accounting” or reporting on official reserves. He asks, “Is the Gold really there?” An important point for sure and will only become more important at a future date when central banks are required to “lay their cards on the table” in “show me the Gold fashion” as a new monetary system unfolds.
I would like to add commentary here from the cheap seats of the cheering section. I am sure that all of the Gold is not where it is “supposed” to be but… let’s assume that it is for the sake of chuckles. Collectively, the worlds central banks claim to hold roughly $2 trillion worth of Gold at today’s prices. The treasuries of these countries are collectively BORROWING FAR MORE than $2 trillion each and every year just to keep the financial system afloat. In other words, governments are deficit spending MORE, every single year than the total amount of Gold that they say that they have but really don’t! Do you see? Even if they do have the Gold that they say, Gold is grossly under priced. By the way, another way of saying “under priced” is to say that there is a “shortage” which is exactly what Sprott is saying AND has backed up with some pretty hard numbers. Please remember this the next time the boogeyman is interviewed on CNBC or Bloomberg and tries to scare you into selling your Gold. Not only are Gold and Silver NOT in a bubble, they are (Silver especially) probably the cheapest, no brainer and safest assets on the planet thanks to central bank/treasury overspending, over borrowing and over printing. The next time you hear the word “bubble,” know for a fact where that “bubble” exists… the sovereign debt and paper currencies of spendthrift and reckless governments.