Sprott - Default Coming As 850 Tons Of Gold Supply Vanished

Today billionaire Eric Sprott told King World News that the massive plunge in gold scrap recycling may be removing as much as a staggering 850 tons of gold from world supplies each year.  Sprott, who is Chairman of Sprott Asset Management, also warned of a coming default on the COMEX, “And when it (the default) happens, there will be a substantial move in the price of gold (and silver). We’ll make up for these last two years in no time.”

Eric King:  “KWN has been receiving information from refiners for quite some time, and this was from one of the largest metals refiners in the world, “The secondary market, which is scrap, business is down almost 50% year over year, and the previous year was already a down year.  The only supply now is coming from the miners.  This applies to both gold and silver.  Gold and silver bar and coin demand is very strong and the supply has essentially dried up.”

Sprott:  “It’s interesting, Eric, that the data on recycled gold is woefully lacking.  That’s what I hear from my discussion with people, and Johnson Matthey in their six month report suggested that their recycling was down.  Your evidence is meaningful.  That’s what I hear.

Because the price has been static or down, essentially, for 2 years, the willingness to trade in gold rings and otherwise recycle some jewelry has diminished here.  If it (recycling) is down 50%, I think recycling adds something like 1,700 tons to the gold supply above mine supply, well, that would imply a reduction of (a staggering) 850 tons (of gold supply)....

“That’s a very interesting number because as you know I wrote a report about two months ago asking whether the central banks have any gold left?  All you see is incredible increased demand on a sustainable basis here.  

The most recent example being the Chinese imports in December, the number was 114 tons.  We only produce 200 tons a month of gold ex-China, and they are consuming well over 50% of that (total monthly global production).

So between that and the coins sales that have been strong, and the suggestions by various advisors, whether it be Kyle Bass, Ray Dalio, or Bill Gross at Pimco, that they should be buying gold, I just don’t know where this gold, where I do know where the gold is coming from, the gold has to be coming from the Western central banks.

As you know they are totally non-transparent about it.  We’ve seen the Germans ask for some gold back.  I think it’s a joke that they are receiving it over 8 years, and only a small part of it at that.  So I have to believe there is a real tightness in all of the metals markets.

If you were amongst the central planers, and we have this huge financial chaos going on all of the time, a bank in the Netherlands and Italy went down, (you would know) the financial system hasn’t settled itself.  Anybody with half a brain would realize, including the central planners, when you are printing money there are going to be consequences of that and they have to happen.  The consequence of course is inflation.

In my mind the tell on inflation would be gold and silver going up.  That would be the most logical place to see it manifested.  So if you are the central planners and you are trying to get away with printing money, it would be in your playbook to keep the price of silver and gold controlled, and that’s what I think we are seeing.

That’s why when we have this huge increase in physical demand, that everybody can quantify, nothing happens to the price of gold.  I’m sure the Western central banks are supplying those physical quantities.”

Eric King:  “Because of the collapse in gold production that’s in front of us, Eric, we have scrap completely drying up at these levels, it’s just vanishing, Eric, the fact that the West is running out of gold to sell into the market out of Western central bank vaults, and the fact that we now have countries forcing bullion banks to repurchase loaned gold as these countries repatriate, you and I both know the price of gold is going to have to vault higher. 

I know that when gold smashes through the $2,000 level, the mainstream media will be telling people it’s because the Fed is winning, and they are successfully reflating the system.  They will say it’s positive that gold is advancing.  This is how they will sell the propaganda so that people are not fearful of a rising gold price.”

Sprott:  “Well, as you know, Eric, most of what we have to listen to is all spin anyway.  I find it ironic that here we’ve had money printing going on since the financial crisis, and now at even higher and higher levels.  Yet there is a recession in Europe, we have negative economic growth in the US, I mean nothing is really growing.

So all of this printing is keeping the financial system together, but it’s not doing anything for the economies.  Some day there will be a default.  I don’t know whether there will be a default on the COMEX, or some industrial user announces they can’t produce something because there is no silver, but the word is going to get out here sooner or later, and it will be quite a euphoric time for the precious metals.

It’s hard to predict when a default event would occur, but I think anyone looking over even 12 to 24 months has to realize we are getting very, very close.  And when it happens, there will be a substantial move in the price of gold (and silver).  We’ll make up for these last two years in no time.”

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/2/11_Sprott_-_Default_Coming_As_850_Tons_Of_Gold_Supply_Vanished.html