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King World News:


Today one of the most highly respected fund managers in Singapore warned King World News that the West is finally running out of available physical gold to supply the market. Grant Williams, who is portfolio manager of the Vulpes Precious Metals Fund, also spoke about the pressure being put on India, by the West, to lease their 200 tons of gold, and how this will impact the market. Below is what Williams had to say this powerful interview.

Eric King: "When the United States closed the gold window in 1971, gold proceeded to go up six-fold in a very short period of time. But during the 1970s, from time-to-time there were threats from the IMF that they were going to sell some gold to stem the rise in the price. We see all of this gold pouring out of the West, and now there is this pressure on India to lease their 200 tons of gold. Does this have a 1970s feel to it to some degree?"

Williams: "There are two major differences now, Eric: The first big difference is that the sellers have been selling gold. And when you have a finite resource, it's not like dollar bills -- you can't just print more. If you keep selling, one day you are going to have sold it all and you are not going to have any more to sell.

"And as I said earlier, it feels to me like the 'loose gold' is out of the market. Also, as I mentioned in our last interview, back in the 1970s Asia was a very poor continent, and so people were only buying gold at the margin, and in very small amounts. Now, there are tremendous foreign currency reserves out here in Asia.

In the last 20 or 30 years, Asia has been a powerhouse. So there is an enormous ability to buy physical gold out here, and this is coupled with a great desire to own gold. That's a very, very dangerous thing if you are trying to sell gold in order to try to keep the price down.

It's fine when there aren't any buyers because you can frighten people and move the price lower. But right now I think anybody who is holding gold and is selling it for any other reason than to raise cash, because they have an immediate forced-need for liquidity, is playing a very, very dangerous game.

We have a supply of gold that only increases by about 2.5% each year. The scrap numbers move around a bit, but they are pretty consistent. So if you increase the amount of sales that these central banks are making, that's going to have an effect, but only for a short period of time. They will quickly run out of gold because of the massive demand, and I really get the sense that this is what is happening right now."

Eric King: "William Kaye spoke with KWN about the Western central banks concealing their secret activities in the scrap market. What are your thoughts on this, Grant?"

Williams: "The numbers speak for themselves. As is always the case in the gold market, there is so much non transparency surrounding it. It's always very difficult to get a definitive answer to anything, especially from the players in the West.

Bill (Kaye) is a great watcher of these markets, and a very, very smart guy. He saw the scrap numbers explode once central banks explicitly stopped selling their gold. When you look at the scrap numbers, the evidence would certainly suggest that some of the central bank sales have been concealed as scrap.

But as Kaye said, nobody likes to talk about it -- nobody likes to be open about this. But these are reasonably easy conclusions to make, Eric, I've got to say."

Williams also added: "We've been sitting through four to six months of severe weakness in the gold price, and this was after a two-year correction in what, to me, still looks like a secular bull market.

I think we have now reached a point in time where the real selling is done, and I strongly believe that for the holders of gold -- the people who really understand the gold story -- the next six months are going to be far more enjoyable to sit back and watch for these gold bulls. The time for gold to really shine is now upon us, and that means much higher prices in the future."