Egon von Greyerz: Gold’s Prospects & Why Gold Is Not In A Bubble

In a recent interview conducted by Fabrice Drouin Ristori from, well-known Egon von Greyerz provides his view on the necessity of owning gold and gold’s prospects. After a lengthy consolidtion of 18 months, the gold price still stands at $1,660 | €1,250 and the silver price at $22 | €30. Enough reason for the bears to argue that the top in precious metals is in and that the economy will recover. On the other hand, gold bulls focus on the monetary and economic fundamentals which leave them convinced that we are nowhere near a top. Egon von Greyerz (EvG), being part of the latter group, explains in this interview which fundamentals lead him to conclude that gold has a long way to go and the bubble in gold is still far away.

Why it is important to own real physical gold and silver and not paper gold and certificates ?

EvG: The paper market, the gold paper market, is a hundred times bigger than the physical market. So there is so much paper outstanding in gold, and in silver, and governments are said to have –world governments – up to around 30.000 tons of gold. Most probably don’t have it, they probably lent it to bullion banks and trading banks, and therefore there is probably not the gold around the banks are saying, the central banks are saying they have, and one day when investors ask for delivery against the paper gold that is outstanding there will not be enough physical gold.

Therefore it is extremely important to hold physical gold because the paper gold will be totally worthless and banks will not be able to meet their commitments.

Why is it important to own your physical gold and silver outside the banking system?

EvG: Well, the world is in a mess, as I said, it was already in a mess in 2002 and it is a lot worse now. We have never ever in history had a situation when virtually every single major government is bankrupt, and when the whole banking system is also bankrupt, the banking system is only standing because banks are allowed to value their toxic debt at full value, or rather at maturity value. If they valued it at market value, no bank would be standing today. So you have a situation where governments are bust, where the banks are bust, or potentially bust, and therefore we think that gold must be held outside the banking system, in your own possession where you have direct access to your physical bars. And because a lot of the gold that is stored in banks – and we have seen that – is not actually there.

How do you see the situation evolving in the future?

EvG: There is no solution to this problem. The problem is too big, as I said, governments are bankrupt, debts are increasing now at an exponential rate, and there is no chance whatsoever to reduce the debts. Any government even trying austerity programs is thrown out immediately, but even if they did try austerity measures, it is too late now. So the next stage that I see, and I think that will start very soon, it could already be in 2013, is that the money printing will accelerate, deficits will accelerate, and therefore money printing will accelerate, and we will be on the way to a hyperinflationary depression.

Now, it might take a few years, but I think it could go faster than we expect because the system is so fragile, so money printing, as I said, will destroy the currencies as all currencies are going down, they have for the last hundred years, they are down 97 to 99 percent against gold in the last hundred years, they are down 80 percent against gold in the last 12 years, so there is not far to go to be down 100 percent and that will happen, and so will the money printing destroy the value of paper money, and that is what will create hyperinflation.

Can we say that gold is in a bubble?

EvG: Gold is not in a bubble, all gold is doing is reflecting the destruction of paper money, you just have to turn the curve upside down, if you look at, rather than seeing gold going up you turn the curve upside down and it is the currencies going down. It is the Dollar going down, it is the Euro going down and it is the Pound going down. And that will continue. Only one percent of world financial assets are in gold today, so nobody owns gold actually, and gold has still gone up over the last 12 years, it has gone up five, six times, depending on the currency. And as I said, still only one percent of investors actually hold gold. So, that will change in the next few years, and which will mean the demand for gold will increase, there isn’t enough supply, so the additional supply can only be met by higher prices. And this is what is going to happen.

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