Monetary expert Jim Rickards returns this week to share the insights from his latest work The New Case For Gold, a detailed and highly-researched study of the fundamentals likely to drive the price of gold bullion in the years to come.
Rickards is quite confident that the price is going higher - much higher in fact - as the current world fiat currency regimes falter, to be replaced by ones backed (at least in part) by bullion.
On the way to that outcome, expect the price to be subjugated to the interests and aims of the largest players on the geopolitical chessboard:
Is there gold price manipulation going on? Absolutely; there's no question about it. That's not just an opinion.
I spoke to a PhD statistician who works for one of the biggest hedge funds in the world. I can't mention the name but it's a household name, you would know the fund. This guy is a PhD statistician. He looked at COMEX opening prices and COMEX closing prices for a 10-year period and he was dumbfounded. He said…This is the most blatant case of manipulation I've ever seen. He said if you went into the aftermarket, bought after the close and sold before the opening every day, you would make risk-free profits. He said statistically that's impossible unless there's manipulation going on.
I spoke to Professor Rosa Abrantes-Metz at the New York University Stern School of Business. She is the leading expert on globe price manipulation. She actually testifies in some of these gold manipulation cases that are going on. She wrote a report reaching the same conclusions. It's not just an opinion, it's not just a deep, dark conspiracy theory. Here's a PhD statistician and a prominent market expert lawyer, expert witness in litigation qualified by the courts, who independently reached the same conclusion.
Now, where is the manipulation coming from? Well, there are a number of suspects but my number one suspect is China. To that you might say: Wait a second, China has 5,000 tons. They lie about it. They say officially they have 1,700 tons but it's very easy to establish that China probably has 5,000 tons or more. Again, that's not a made up number. How do we know? Well, we look at Hong Kong imports. China lies, Hong Kong doesn't - they actually have fairly reliable trade statistics. They're showing about 700 or 800 tons a year of exports from Hong Kong to China. Let's just say 800 tons a year there and we have geological surveys that show China produces about 450 tons a year from the mining output and we know they have zero exports. Combine Hong Kong exports to China with Chinese indigenous mining output and you get a figure of about 1,200 or 1,300 tons a year times six years. That's 9,000 tons right there. The only thing that's not clear is how much of that is public and how much of it is private.
I was in Switzerland a couple of weeks ago and met with the head of the world's largest gold refinery. His estimate is about 70% goes to private usage and about 30% to the government. Take the 9,000 tons, apply 30% and you get 3,000 tons, plus the 1,000 they admit, so you easily get to a figure of 4,000 or 5,000 tons. But here's the problem: China has to get to 8,000 tons. If they want to look the US in the eye and have a big enough pile of poker chips the next time the major trading financial powers sit down to play poker and recut the deal and reform the international monetary system, they have to have as much gold as the US. So they're still out to buy another 3,000 or 4,000 tons. Ultimately, the price will go much higher, but if you were a buyer of 3,000 tons wouldn't you want a low price? Of course you would. By the way, they are untouchable by the CFTC or the Justice Department. We can't prosecute China. We can't get access to them. They would laugh at is.
So you've got a big whale out there buying thousands of tons through stealth interception motivated to have a low price, which is untouchable by US regulatory authorities. There's your culprit right there(...)
(...) The senior officials know about it. They're very relaxed about it. They think we need to do this. The question is: Why? Why does China need gold reserves? Obviously, you're going to reset the monetary system on a gold basis. If you do that, back to Churchill 1925, you've got to get the price right. What is the implied, non-deflationary price of gold in the reset monetary system? The answer is at the low end $10,000 an ounce, at the high end $50,000 an ounce. It's coming.
People say "I hear you Jim and I agree with your argument, but I'll wait until it starts to take off." Sorry, you're not going to be able to get the gold. It will take off, but you'll be standing there watching it on television going to $2,000, $3,000, $4,000 an ounce while frantically calling your dealer saying: Get me some gold! You know what the dealer is going to say? Sorry, sold out: back ordered. You call the Mint: back ordered. You're not going to be able to get it. That's my point. Get it now, while you can, at a good entry point. Not 100%. Just get 10% of your assets in gold, sit tight, and you'll be fine.
Click the play button below to listen to Chris' interview with Rickards (39m:36s)