This is a fantastic conversation between John Embry (Chief Investment Strategist for Sprott Gold & Precious Minerals Fund) by James Turk (founder of GoldMoney.com and the GoldMoney Foundation). Their talk brings about topics like the recent action in the gold price and silver price, gold shares, monetary stimulus worldwide and the coming (hyper)inflation. Their conclusion is that the gold bull market is not over. In fact, both respected men strongly believe that gold and silver are more than ever safe havens and that the gold bull market has a very long way to go.
They start they conversation by looking at the recent gold price action. Clearly the fundamentals of the gold price are very strong, but they consider it very obvious that the price drops were engineered. Look for example at the end of February, where they mention 29/02 as being a “leap day slaughter”. Both men are convinced that the selling was forced and that gold behaved in an extremely counter-intuitive way. The reason: the gold and silver price drops happened exactly the same day as the LTRO (Long-term refinancing operation) was announced. On that same day, more than 700 billion euros flooded the EU market, while the Fed came out almost the same moment to announce monterary stimulus would not be necessary in the near future.
John Embry interestingly states that if you’re negative on gold, you must be bullish on currencies. This obviously doesn’t make sense in the current environment. On the other hand, he experiences the “risk on/risk off” moods by investors as very irritating. It’s simply nonsense that gold is associated with risky assets like stocks, while risk off triggers a flight to the US dollar and bonds. That’s a terrible mistake in the eyes of Mr Embry.
The two men observe that the risk/reward is very positive currently, but sentiment is very negative. That sentiment has been enforced by the negative media attention, also around the “leap day slaughter”.
Other topics that are discussed during this conversation :
- the performance of gold shares and their counter-intuitive behaviour currently
- the expected massive rush out of paper currencies into gold before the end of the gold bull market
- the inevitability of hyperinflation
- money printing, Keynesiasm and Jim Sinclair’s concept of “QE to infinity”
- the importance of buying gold and silver and the concept of dollar cost averaging