“Not Owning Gold is a Form of Insanity,” Says Broker to the Queen

If those words sounds familiar, that’s because you may have read it somewhere on the Web some time in January of 2011.  “Not owning gold is a form of insanity,” Robin Griffiths of Cazenove Capital (believed to be the private broker for the British royal family) told CNBC on Jan. 11. “It may even show unhealthy masochistic tendencies, which might need medical attention.”

Though Griffith’s apparent flare for offering up salacious soundbites for financial journalists, his diagnosis directed at investors who worry whether their financial future is intact, yet, don’t hold a meaningful portion of their wealth in gold may not have wandered too far from making a valid point, especially considering that since January 2011 the world’s unresolved issues have only mounted rapidly in quantity and severity. Sign-up for my 100% FREE Alerts

Consider the news of just the past two weeks, alone, and never mind the events that have shaped the world’s radical change in public consciousness since the fall of Lehman Brothers in 2009.  Griffith’s seemingly flippant remark of more than a year ago appears more and more worthy of repeating as the endgame to the crisis unfolds.

On the Feb. 29, the European Central Bank announced a massive QE program in the amount of $712 billion for approximately 800 European banks—a move so audacious that Mr. Gold, Jim Sinclair, felt compelled to alert investors of the troubling event, underscoring the desperate manner by which the announcement was obviously camouflaged, obfuscated and provisioned in the hopes of not triggering a panic into the gold market.

“Today does qualify as one of the biggest injections of liquidity into the system in the history of the system,” Sinclair told King World News.  “Today was a cover-up by the U.S. Federal Reserve and by the mainstream media of one of the largest injections of liquidity into the system that has ever occurred.”

Sinclair continued to explain that, in essence, the Fed has embarked on a course as the buyer-of-last-resort to, not only the U.S. debt market, but Europe’s equally-sized debt market, as well.  In total, the U.S. dollar and euro represent approximately 88 percent of central bank currency reserves (excluding gold reserves).  These reserves have been debased at a staggering rate, with no end in site.

“This money flows, in order, through these entities—Federal Reserve to the IMF; IMF to the ECB; ECB to the member banks.  This is pure QE on a global scale,” he said.

On Thursday, following the decision by the ECB to maintain its member bank rate at one percent, reporters ask ECB president Mario Draghi about contingency plans for the euro in the event of a Troika failure in dealing with the European sovereign debt crisis.  Draghi said, pointedly, “We have no Plan B. Having a Plan B means to admit defeat.”

Translation: The ECB will print, print and print more money (or get it in a circuitous way from the Fed)—or die.

Again, on Thursday, in response to the ECB’s latest $712 billion injection of capital into the European banking system, former ECB executive member Juergen Stark told the Frankfurter Allgemeine “. . . the balance sheet of the euro system, isn’t only gigantic in size but also shocking in quality.”

In total, the ECB’s balance sheet now stands at more than (euro)3 trillion, or nearly one-third larger than the Fed’s ‘official’ balance sheet, with more to come, according to some prominent analysts.

On March 8, German newspaper BILD ran with a story about the rumblings in Germany regarding the status of its 3,401 tons of gold reserves.  A growing mistrust of the United States as the custodian of Germany’s gold has reached critical mass, according to BILD sources.  Many Germans wonder if they’ll get their gold back.

According to the article, German politicians are feeling heat from a growing concern among the German people regarding the euro and Germany’s financial obligations to a failed euro experiment.  Germans wants an audit of its gold and repatriation to Frankfurt in the event of a euro collapse and an emergency reinstatement of a gold-backed deutsche mark.

When elected member of the Bundestag, Phillip Missfelder, made an inquiry of the Bundesbank as to why Germany’s gold was not audited in 2010 as required by law, the Bundesbank’s response sent chills throughout Germany’s fiscally conservative electorate.

“I was shocked,” Missfelder told BILD.  “First they said that there was no list [of gold bars].  Then there were lists that are secret.  Then I was told, demands endanger the trust between alliance bank and the Fed. [Google translation]”

On the heals of the BILD article comes another article about a country and a people known for prudent fiscal behavior: the Swiss.  They, too, have come to the realization that the euro is sinking and that a Swiss franc peg to the euro will take the franc down with it.  They want their gold.

Zerohedge posted on Thursday:

“Gold Initiative”: A Swiss Initiative to Secure the Swiss National Bank’s Gold Reserves initiative, launched recently by four members of the Swiss parliament, the Swiss people should have a right to vote on 3 simple things: i) keeping the Swiss gold physically in Switzerland; ii) forbidding the SNB from selling any more of its gold reserves, and iii) the SNB has to hold at least 20% of its assets in gold.

Contrary to propaganda spewed by the Fed, U.S. media and America’s unofficial spokesman and cheerleader for a broken Bretton Woods scheme, Warren Buffett, in the end, it all comes down to the gold.  How much.  Where it is?

And if the two countries known for their level-headed approach and reputation for maintaining a strong currency are now lurching for the gold, it’s most likely that other Western countries will follow suit—and quickly.

While the news turns from the latest scheme to bailout Greece, to gold, why then would an investor put off acquiring a 3,000-year-old, tried-and-true asset that holds value under the most dire of financial and geopolitical circumstances—such real-time textbook examples of profound currency debauchery from each G-7 nation, imminent war and political upheaval?

Obvious to a long-awakened bunch, crunch time approaches, and, as Swiss economist and money manager Marc Faber has said in the recent past, it’s also time for each investor to become “your own central bank.”  And if investors cannot or will not see the consequences and market reaction to bizarre policy actions taken by the stewards of 88 percent of the world’s reserve currencies, Cazenove Capital’s Robin Griffiths’ characterization of “masochistic” investors knowingly taking no action in response to this abomination won’t seem so sensationalist after all. Sign-up for my 100% FREE Alerts

Silver Price: “10-bagger” from here

Cazenove Capital’s Robin Griffiths believes that when the ‘big reset’ finally comes to the global financial system, the price of silver in today’s dollars could reach a ten to twenty “bagger”—that’s 10 to 20 times from $34, or $340 to $680 per the ounce. Sign-up for my 100% FREE Alerts!

“I believe going forward that silver will be a ten or twenty bagger, one just has to tolerate the short-term volatility,” Griffiths told King World News.

Griffiths suggested that today’s price for silver reflects a continued lack of awareness among the general investor public of its safe haven status and store of wealth, especially when widely-quoted exchange rates don’t reflect the carefully orchestrated currency devaluations among central banks.

The lessons of drastic changes in currency crosses leading up to the 1987 stock market crash and Asian currency crisis of 1997 must remain fresh in the minds of policymakers.  In hindsight, the G-5 Plaza Accord and the rapid rise of capital flows into the ‘Asian Tigers’ destabilized the global financial system, respectively, resulting in market convulsions, bankruptcies and unprecedented (at that time) central bank interventions.

Big swings in currencies and in the proxies for those currencies, debt markets, bring on sudden bankruptcies to highly levered participants, such as a Dexia and MF Global as well as the temporarily hidden losses between counter parties of the two entities.  In those two cases, the lesser-understood sovereign debt market crisis was the culprit and overshadowed any sizable swings in the dollar-euro cross.

That may explain, to a rather limited degree, why demand for precious metals remains remarkably low in the U.S., still, among the vast majority of American investors who’ve had little to no experience coping with the fallout of a grossly mismanaged currency.  The knee-jerk reaction to a financial crisis for many is to run to cash—not gold and silver, as many investors still believe in the integrity of the US Treasury market.

“There is no euphoria in the gold market at the moment,” said Griffiths.  “It’s not an over-owned trade. There are still a few gold bugs and prudent people who are using gold as a hedge against paper money being overprinted, but we are nowhere near the exponential, runaway move yet.”

Those above the age of 60-years were probably old enough to remember high inflation and high unemployment of the 1970s—a time of rapidly deteriorating dollar value overseas, and wealth, domestically.  Both inflation and sluggish consumer demand can coexist.  Gold preserved wealth, while holders of Treasuries were decimated in purchasing power.

At this stage of the financial crisis, it feels more like 1974 all over again.  The threat of deflation (according to the Fed and commentators) grips the markets, as was the case in 1974, corralling investors into Treasuries—a move that famed commodities trader Jim Rogers said is “the wrong thing to do.”  Rogers made his first fortune getting it right in the turbulent 1970s.

Moving into cash, Griffiths believes, will be the trade in the coming months as the European mess gets even messier.  That means a rally in the USDX, according to him.

“The dollar should go higher than 81 and I could see it running up into the high 90s on the DXY.  That would be a significant dollar run,” Griffiths speculated.

“People are still worried, and the dollar, still, for the moment, is the world’s leading currency,” he added.  “Once they go into cash that’s what they go into.  So I think we are in a period, from now until the beginning of the year, where you should be long the U.S. dollar.”

In a way, Griffiths sees the world as FX Concepts John Taylor sees it, parting, however, from Taylor on the outlook for gold during a hypothetical dollar rally.  Griffiths envisions a higher dollar and higher gold prices.

When KWN’s Eric King asked Griffiths if his outlook for the dollar meant lower gold prices, Griffiths said, “Not necessarily, when you are worried you buy a bit of both don’t you?”

On the other hand, FX’s Taylor expects gold to drop to $1,000 before jettisoning to new highs—similarly to gold’s plunge from its nearly $200 all-time high in 1974 before dropping back to $100 during an 18-months sell off period—which lasted until 1976.  The yellow metal, then, made its big move to eventually reaching a high of $850 in Jan. 1980.  In disbelief, most investors were left behind until the very last moment of the end to the trade.  Taylor, presumably, believes gold will be sold to satisfy redemptions among hedge funds.

Euro Pacific Capital’s Peter Schiff has a different take from both men.  He believes the move down in the dollar to its last bastion of major support at the USDX 72 level is imminent and will fail that support, leading to a panic out of the dollar in coming months.  He said investors will be shocked by the contrarian move in the dollar.

So what to do among the disparate opinions from some of the smartest in finance?  As Dow Theory Letter’s famed author Richard Russell puts it, just buy enough gold as an “insurance policy” and “forget about it.”  But if investors seeking leverage to the gold price, they should buy more silver.  That’s the advice of nearly all hard money advocates, including the latest to come aboard the silver train, Gerald Celente.

Blue-blooded Cazenove Capital: Gold $5,000 “at a minimum”

Robin Griffiths, a regular guest of King World News, told Eric King yesterday he expects the gold price to ultimately reach between $5,000 and $10,000 per ounce “at a minimum” after a pullback  from a $400 move to a record $1,911.40.

Griffiths’ opinion of the direction and magnitude of the next major move in gold weighs heavily within the investment community, as the 40-year veteran and technical strategist at British wealth management firm Cazenove Capital Management works among investment professionals rumored for years to be  trusted advisers of the Queen of England.

He told CNBC in January, when gold traded at, what was thought to be a lofty price at the time, of $1,375, “I think not owning gold is a form of insanity. It may even show unhealthy masochistic tendencies, which might need medical attention,” adding that the dollar will be printed into “oblivion.”

Beyond Griffiths’ flare for the humorous, the point of view he put across isn’t far off from what he sees is the malady suffered by the mainstream investor at the hands of the Fed’s 98-year history of deception—a deception of fostering mislaid trust in a “modern” financial system devoid of a 6,000-year-old demonstrable trust in the value of gold as the ultimate medium of exchange.

That “tradition,” stated Fed Chairman Ben Bernanke, is the reason why the U.S. Treasury holds 8,133 tons of gold as reserves.  It was a telling response to Rep. Ron Paul’s inquiry during the Fed’s Humphrey Hawkins testimony in July into the Fed’s viewpoint on the long-standing financial role gold has played as money throughout recorded history.  Paul’s attempt to expose the Fed as a newfangled institution founded upon untested and questionable principles worked, as he brought to light that mankind has already discovered the least-flawed medium of money, gold—a simple, yet elegant tool that has been tested for a time period exceeding Christianity by a whopping 4,000 years.

Ultimately, the Fed cannot win the game of inculcation, brainwashing and other “cultist” practices perpetrated on the masses unaware of the central bank’s true agenda—an agenda which is to ultimately protect member banks from credit collapses brought on by the inevitable “irrational exuberance” among speculating bankers suffering from one of the seven deadliest of sins—greed!

And how many investors know that the Federal Reserve Act of 1913 was the response to the worldwide banking crisis of 1906-07, which wiped out the “elite” from New York, London to Paris?  Not many, and that ignorance among the American people won’t be placed at the top of any agenda at the Eccles Building in Washington any time soon.

Is it no surprise, then, that documents obtained by Bloomberg about the Fed’s activities since the fall of Lehman revealed that banks across the globe received more than $1.2 trillion in loans, while homeowners lost their homes to those very same bankers?

Maybe that’s what Griffiths alluded to with his seemingly facetious remark on the mental state of the typical retail investor who still has no gold in his portfolio.  The mom-and-pop investor must undergo some serious deprogramming, first, regarding the true definition of money, then learn the tricks played on them by central bankers who presumably do know before a rational case for owning gold can be accepted as self-evident—even at prices which today appear so high in terms of dollars.

But Griffiths believes that the gold price isn’t anywhere near its ultimate print when all the fiat dollars, euros, yen and sterling revert back to their intrinsic value—zero.

“I’m in the camp thinking it (gold) will go to somewhere between $5,000 and $10,000 an ounce, at a minimum,” he said.  “There are scenarios that take it higher than that, but it’s got many times up from here.”

Clearly, Griffiths believes that from the data the dollar and competing currencies will be debased, and debased quite substantially.  The hole left from imploding derivatives stack up into the 10s of trillion, if not 100s of trillions, according to estimates derived from the total dollar value of derivatives outstanding at the Bank of International Settlements (BIS).  Now back those numbers into the number of gold ounces on the planet.  Griffiths is lowballing.