By Dominique de Kevelioc de Bailleul
It’s all too clear to long-time gold and silver investors, the finally days have come for a collapse of the global financial system. No doubt about it, this time. Gold and silver will take its rightful place as money whether the global monetary magicians like it, or not.
In a striking interview on King World News, Egon von Greyerz of Switzerland-based Matterhorn Asset Management told Eric King the financial world is in collapse—right now—in 2012—just in time to vindicate the Mayan prophecy buffs who have been repeatedly ridiculed as ‘unsteady’ throughout the year of financial turmoil.
With Cyprus, Greece, Spain and Italy (now Slovenia) collapsing at once, “it’s incredible that the Mayans forecast 2012 would be the end of a major era,” said von Greyerz. “It looks, today, like we are standing on the eve of massive changes in the world that will have consequences for a long, long time to come.”
Time is on the side of every gold and silver stacker. The trend is up, and any steep drop in the paper price (albeit from a JP Morgan takedown or industrial buyers slacking of purchases from bad economic news) has triggered the Pavlovian response from accumulators of physical to ‘back up the truck’ and drain inventory from the Comex. That knee-jerk reaction, buying on paper market dips as well as buying truck loads on crashes is a relatively new phenomenon in the precious metals markets.
That patience and forthrightness throughout the 11-year precious metals bull market may be well rewarded soon, according to von Greyerz.
FOCUSING UPON THE PHYSCIAL SILVER MARKET AND GLOBAL QE PACKAGE
Not only are fiscal budget deficits and sovereign debt levels unsustainable, so is the rate of physical silver leaving inventories. To put the silver market into a proper prospective, especially to newcomers, here’s a recap of Eric Sprott’s interview with FinancialSense Newshour of October 19, 2011. It’s worth repeating a spot-on interview with a dealer who has his ear to the ground on a daily basis.
It’s all about the physical market.
“There’s a paper market; there’s a physical market. The physical market is what I analyze more than anything else. And all I see is buyers.”
The markets recognize gold as a reserve currency, and silver cannot be far behind.
Sprott: “One of things I believe, sort of, on a longer-term prospective, is that, the markets have made gold the reserve currency . . . it’s gone up hundreds of percent against every currency in the world, so it is the world’s reserve currency as far as the markets go. And, as an offset to that, gold is not going to be a reserve currency without silver playing a hand, here.”
Historically, silver trades at an ‘equilibrium’ price of 1/15th the cost of gold. Today, gold trades at more than 50 times the price of silver’s price.
Sprott: “Give it three to five years, we’re going to get back to ratios which are way more appropriate to the underlying fundamentals of gold and silver.”
The global banking crisis will drain cash from the monetary system into gold and silver.
Sprott: “If you think it’s bad for banks, today, wait until you deal with a couple of years of negative GDP growth and what happens to the value of those [tier-3] paper assets that they own, because it will get worse. One thing I’ve always imagined . . . the ultimate destiny for gold and silver is that, people will prefer to own those investments rather than have their money in the bank.”
See BER article regarding future GDP, Jim Rogers’ Most Dire Warning, Please Get Worried
Conventional commentary on the state of the banking system is completely wrong. Ignore it.
Sprott: “Three months ago (July 2011), when they did the European stress test, Dexia bank was considered to be the most well-capitalized bank. And three months later, they were . . . I don’t the word, broke, or taken over by respective governments.”
Fund managers haven’t discovered the silver market yet.
“You go to some of the biggest names that even own gold and you ask them: Have you looked at silver? They haven’t even looked at it. So, I think we’re in the early days to people moving into silver, both in the sense of owning physical silver and of course in the sense of owning silver stocks. . .”
Fast forward back to von Greyerz’s latest KWN interview. Everything Sprott spoke of in the October 2011 interview may be coming to a head right now, according to von Greyerz.
“What we know is that the euro will collapse, and it doesn’t matter whether it collapses by being printed into oblivion or because many countries desert it such as Greece, Spain etc.,” von Greyerz said. “We also know that other major currencies will collapse. The consequences of these (eventual) collapses will be horrible because we will have a hyper-inflationary depression.
“Gold is on the verge of a major breakout here. I agree with James Turk that this summer we could see a major move starting. I could see a 12 month rise of major magnitude. Gold will reflect the destruction of the world economy.”
And silver’s ratio should shrink dramatically during a summer rally, giving investors of the white metal more bang for the buck against gold on the way up during a catchup feeding frenzy from fund managers and retail public caught off guard. Maybe the Mayans were right after all.