Eric Sprott, “Investment Opportunity of your Lifetime”

By Travis Johnson, Stock Gumshoe, April 4, 2014

These are my notes and instant reactions from a presentation at the Value Investing Congress, the notes below might contain errors, paraphrases, incorrect quotes, or misinterpretations.

I don’t know whether Eric Sprott has ever presented at a Value Investing Congress, but I have never seen him speak before. He is a giant figure in asset management, particularly in Canada and in natural resources, and has been focused on gold since at least 2000. In the past few years he’s often been a big silver enthusiast, so let’s see what he’s got to talk about now.

And yes, it is going to be about precious metals.

He starts by talking about manipulation — recent info on gold manipulation:

BaFin, the German SEC, investigated the London bullion market and announced in January that the possible manipulation in the gold market is “worse than LIBOR” … and that day, Deutsche Bank quite the London gold market.

THere’s also a lawsuit over manipulated gold prices on the COMEX over the last decade. Suit filed about three weeks ago.

Recommends book, The Gold Cartel (Dimitri Speck), who looked at the market as a mathematician and concluded that manipulation started in 1993.

He also cited a Bloomberg article about the Gold Fix, which you can see here.

And 2013 saw 6-8 sigma events, a likelihood of one in a quadrillion.

He thinks we have an increase in gold demand of 2,000 tonnes a year above supply (mine production is about 4,000 tonnes a year, ex Russia and China it’s about 2,200 tonnes), mine production has not really climbed in 14 years — so where is the gold coming from?

50 million ounces of gold are traded a day, only 80 million are produced a year, so the paper markets overwhelm the actual supply.

His analysis:

Western central banks have no gold left.
The crash in gold was a raid in 2013, the investment banks recommending a sale of gold were redeeming their GLD shares for physical gold.
China’s demand is so high that it consumes almost all the world’s mine supply. They have net imports of 1,700 tonnes and ex China and Russia mine supply is only 2,300 tonnes.
India cooperated with other central planners to eliminate gold imports.

In February, supply and demand were again out of balance — China does not provide data, but ...

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