Swiss Refiners Unable To Keep Up With Massive Gold Demand

Today Egon von Greyerz told King World News that Swiss refiners are still unable to keep up with the massive global demand for physical gold.  Greyerz stated that Swiss refiners are working 24 hours a day, 7 days a week, but simply can’t keep up with the massive orders for physical gold.  Below is what Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say in this tremendous interview. 

Greyerz:  “Right now I’m looking at what’s happening in the US and Bernanke has been Chairman of the Fed for seven years and he’s been the most productive man in the history of the United States.  During his reign the federal debt has gone from $7 trillion to $17 trillion.  That’s up two and a half times.  

But of course gold has continued to reflect the increase in debt and to reveal the destruction of paper money.  So gold is also up two and a half times during the same period, and that’s with gold at $1,470 today, which is near the low corrective level....

“Since we know continued money printing is guaranteed, so is a higher gold price.  Because of the exponential increase in government debt governments are desperate to keep interest rates at virtually zero.  This week the ECB lowered their rate to .5%.

So now all of the major economic economies of the world, the US, Japan, Europe, all have negative real interest rates.  Take US short-term Treasuries, they’ve been at zero since the autumn of 2008.  That’s 5 years that short-term Treasuries have been at zero percent.

But these low rates are not helping the real economy.  The only beneficiaries are the capital markets.  Now rates can’t go lower and so governments are pushing on a string since these rates have absolutely zero stimulative effect.  Of course governments couldn’t afford to pay a real market interest rate or a non-manipulated rate on their debts.  

So as Mark Twain said, ‘I’m more concerned about the return of my money than the return on my money.’  Well, if you look at government debt today there is no return on the money whatsoever, and there is no guarantee of the return of the money since the value of the money long-term is guaranteed to go to zero because of the continued deficits and money printing.

This is why you have to ask yourself why investors buy non-yielding instruments which will never be repaid in today’s money?  Instead, they could own real money, which is debt-free and can never be printed.  That is of course gold.  This is exactly what is happening right now, Eric, in the precious metals markets.  

While the mainstream media focuses on the paper gold price, savvy investors around the world are now buying all of the physical gold that is available.  In country after country we hear about how sales of gold are absolutely booming and everyone is running out of stock.  Gold dealers and jewelers can’t keep up with demand, to the point that some of them have empty shelves.

People are queueing up to buy gold.  Look at the Swiss refiners, they are continuing to have major delays in delivering gold.  These delays are several weeks and this is in spite of running at full capacity, 24/7.  Refiners’ premiums for prompt delivery right now are around $6 to $7, and it’s been as high as $20 recently.

At some point this extraordinary physical demand will result in a massive surge in the gold price.  What will happen to the gold price when the world financial system comes under real pressure again, and money printing has to accelerate?

There will only be physical gold available at massively high prices at that time in order to compensate for what will be a total lack of supply.  So investors must not be concerned about the correction in the gold price.  It has nothing to do with reality.

Gold will continue to reflect the destruction of paper money.  Even with the pullback in the price of gold, over the last 12 years gold has produced a 16% compounded annual return.  That gain will only accelerate in the next few years.  So investors should just focus on buying physical gold and storing it outside of the banking system.”