Eric Sprott - Physical Gold Shortage Now Reaching Extremes

"With the paper price of gold pulling back, today billionaire Eric Sprott told King World News that the shortage of physical gold is now reaching extremes.  Sprott also discussed the implications of this, as well as Western central planner desperation.  This is the first in a series of interviews with Sprott that will be released today.  Below is what Sprott, Chairman of Sprott Asset Management, had to say in part I of this remarkable series of interviews.

 

Sprott:  “I have now written three articles titled, ‘Do The Western Central Banks Have Any Gold Left?’  I think we have seen some things develop in the last eight months that tells you there is a bona fide shortage of gold.

 

It all started with the Germans saying they wanted their 330 tons back, which is a mere 4% of what the U.S. theoretically owns, and they (the US) announced it would take seven years to deliver it back (to Germany)....

 

Then we had ABN AMRO where they said that people wouldn’t get their allocated gold.  We already started to see depletion in GLD at the beginning of the year, not just with the April and May smashes, and it was obvious to me that there was a shortage (of gold).

In my mind what happened was the powers that be thought, ‘What are we going to do here?  We can’t have people find out that the central banks don’t have any gold because it’s all been leased and sold to Asia.  So, what are we going to do?  Well, let’s go bomb the COMEX (price), and maybe everyone will see their GLD, and we will go in and buy the GLD and redeem the (physical) gold.’

 

As you know, 600 tons of gold was redeemed.  600 tons is a big number.  So we’ve had a 30% increase in supply because of the GLD liquidation.  Of course during this time period, all of the investment advisors who told people to sell were the same people that covered their shorts.  So they (bullion banks) have gone from being short gold to being neutral on the COMEX.

We have seen the COMEX inventories decline rapidly.  We know that all of the dealer inventory on the COMEX has already been spoken for by delivery notices, so essentially there will be zero (inventory) if they ever make the delivery.

And the central planners (also) went to India and said, ‘Look, you’ve got to do something about all of this gold buying in India.’  So we’ve had ten different steps by the Indian government to try to curb demand -- a 2% tax, a 4% tax, a 6% tax, an 8% tax, and a ruling that banks couldn’t lend money for people to buy gold. 

They also convinced the Jewelers Association that as of July 1st they couldn’t sell gold bars and coins.  Just last week there was a new rule implemented that if you are importing gold you have to prove that a certain amount is being re-exported.  We’ve probably had ten or twelve things (restrictions) happen in six months, all of which is a huge attempt to get the second biggest buyer of gold in the world, after China, to decrease consumption because the gold isn’t around.

The central planners have arranged all of these things.  I think it’s just been one big scheme to try to get people dissuaded from owning gold and to cause supply to come out.  As you mentioned, because of it (central planner actions) we have the gold forward rates (for gold) being negative, backwardation, and inventories plunging, all of which have been manifested because there is a shortage of gold.

I believe there is a huge shortage of (available physical) gold.  You have had many people comment on that -- Andrew Maguire over in London, who talks about all of the delays in shipments from the the LBMA, and people commenting that perhaps there will be a COMEX failure to deliver. 

All of my work tells me that there is a serious shortage of gold on an annual basis.  The central banks have supplied it in the past, but they don’t have the ability  to supply it anymore.  So I think we are getting set up for a big run in gold.  It looks like we’ve already seen the bottom and I think we are well on our way here.”

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/26_Eric_Sprott_-_Physical_Gold_Shortage_Now_Reaching_Extremes.html