Swiss Gold Refineries Start Facing Supply Issues

In this audio interview conducted by TheDailyCoin, Claudio Grass, Managing Director of Global Gold in Switzerland, covers mainly three topics. First, he describes how the political landscape in Switzerland is experiencing a constructive vibe with the success of a new libertarian party (UP). Second, he discusses the gold market and gold’s value. Third, he explains his view long term view on “the end game” of the current paper based monetary and financial system. Our interest goes particularly to the second topic, so we are highlighting in this article the facts and thoughts that Claudio Grass is sharing in his interview.

An important observation by Claudio Grass is that investors feel insecure about investing in gold because of the low gold price. His personal view is that the gold price should not act as the main driver to own the metal. Gold’s paper market is much, much bigger than the physical market; no surprise the paper market is dominating price setting currently. The more important point is the physical aspect of gold. The metal, being a hard asset, has an important benefit as a “monetaryinsurance.” That is what one should learn from 5000 years of monetary history. Investors should value this aspect more than short term price movements.

From a market point of view, Claudio Grass points out that some banks have increased their gold positions. For instance, Goldman Sachs acquired half of Ecuador’s gold reserves while simultaneously decreasing the metal in their gold ETF.

An even more interesting point is the trend among the Swiss refineries. In general, Swiss refineries, acting as a central hub in gold’s global trade, are still working overtime. From a demand point of view, it seems that purchases out of China eased somewhat lately, probably driven by the credit bubble risk in China. On the other hand, Swiss refineries seem to face difficulties acquiring the metal. The physical supply issues are mainly centered around a scarcer availability of recycled gold. There are no specific statistics available yet as this seems the start of a trend. Claudio recommends keeping a close eye on this trend.

To put that last point in perspective, one should remember that the amount of above-the-ground gold (worldwide) is approximately 175,000 metric tonnes. The newly mined gold compared to available supply is some 2% on a yearly basis. So gold demand is merely about changing hands. If gold supply is drying up while demand is not considerably decreasing, it is a perfect recipe for a supply shortage.

What does the end game scenario look like? Some analysts are predicting $9,000 gold and a gold backed SDR currency, but what is the view of Claudio Grass? He admits that it is impossible for anyone to know. Will it end with a collapse, another war, or in another way? With history as our guide we know that war is the most likely outcome. Currently we are in a currency war which has equally destructive effects. Claudio Grass believes that the paper system will collapse one day in the future. Just like one ounce of gold bought you a house in Berlin in the 20ies, something similar would happen again. Based on the principle that gold and silver are money while everything else is credit, one should be concerned by the fact that property rights are of temporary nature in today’s financial system (because central planners can inflate or deflate the money supply, to name just one example).

A deep personal concern of Claudio Grass is the ongoing wealth redistribution and distruction of the middle class. The huge amounts of money being printed translate into a booming stock market. At the same time, the government is able to “protect” the poorest by avoiding social unrest. Meantime, however, the middle class is being destroyed. That could end really badly.

Listen to the full interview (below). Readers are recommended to read Claudio Grass’ latest outlook report and subscribe for free to future editions on Global Gold.

 

 

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