Gold, Silver, The US, Europe & The Tungsten Scare

Today Egon von Greyerz spoke with King World News about  the US, Europe, the tungsten scare, what is happening in the gold and silver markets and what to expect from the latest rounds of QE.  Greyerz, is founder and managing partner at Matterhorn Asset Management out of Switzerland.

Here is what Greyerz had to say:  “I just wanted to say a few words because we’ve had another tungsten scare.  Physical gold is the best way to protect investors from the destruction of their wealth.  This is the ultimate form of wealth protection.”

Now there are many things to consider.  You should only have physical, and you must buy from reliable sources.  We’ve seen many of these tungsten scares, and in our view you should buy gold from within the LBMA system.  That is a guarantee for getting real gold.

I know many people inside the LBMA system and no one has ever seen a tungsten bar within that system.  We certainly have never seen a tungsten bar.  What we do regularly is melt down bars for clients.  Clients that purchase the 400 ounce LBMA gold bars will ask for them to be made into smaller bars.

If we get hyperinflation and gold goes up the way we think it will, you don’t want to have the big bars.  You want to break them down into smaller units.  So we regularly send bigger bars back to the refiners to melt down, in order to get smaller bars for the clients....

“In all the time we have been doing this we have never, ever had a problem with the quality of a gold bar.  But smaller bars such as one ounce units are good to have.  Also, be very careful about storing gold at home.  This is something to consider with the amount of crime we are going to see going forward.

Don’t store it at banks either.  The gold can either be encumbered, which we have seen, or not be there at all.  We have had many cases where the gold that banks were supposed to be storing for their clients, even in ‘allocated’ accounts, was not at the banks.  They just didn’t have it.

We have gone to move ‘allocated’ gold out of accounts at banks and the banks simply didn’t have it.  So banks are dangerous when it comes to the storage of gold.  Then you have the problems we have seen at MF Global and Sentinel, where the banks have used client assets, which was supposed to be segregated, to actually finance their trading lines.  So investors have to be careful, and make sure they purchase their gold from reputable sources.”

Greyerz also added: “The action in gold has been very good.  We are going to have one of these moves which is going to be relentless to the upside.  Gold and silver will just go up, consolidate, and continue going up.

Today we had a little bit of volatility.  We made new highs, and then corrected a bit, but that’s just minor.  The trend will continue.  In euro terms, gold is at a new all-time high.  It is very significant that gold is making new highs in the euro. 

If gold finishes the day with good strength, it will obviously be a new weekly closing high as well.  Silver will continue to outperform gold, but in a much more volatile fashion.  So investors in silver have to exercise patience, and continue to ride the trend, regardless of how many bumps in the road they experience.

I would also like to add that a couple of days ago we had Japan’s decision to come out with a massive QE package.  That really completes the round of all of the central banks.  We had been saying for quite some time that there would be coordinated action, and that’s exactly what we have seen take place.  They all made their moves within a week of each other.

So we’ve had the Fed, the ECB, the Bank of England, and the Bank of Japan, all coming in with additional QE.  Other countries like India and Sweden have also come in with stimulus.  So this is worldwide and it is concerted action.  This was the only thing they could do to save the system, but in the end they are not going to be able to save the current system.

No one is capable of cutting their deficits.  Spain is now having a structural reform package.  Austerity doesn’t work.  The people won’t have it.  Instead they will throw out the governments.  So Spain, being bankrupt, is going to get more money, and this is how it will continue in country after country.

Greece is the same.  Italy, they are having massive problems.  The US is now on their third round of QE, but the third round of QE is not going to help the economy at all.  The US is lending unlimited amounts of money and charging nothing for it.  This sounds like a new ‘Goldilocks’ economy.  It sounds wonderful, but it doesn’t work because the money you are lending is becoming worthless.

In 2008 the world printed, guaranteed or lent $25 trillion.  We did see a couple of years of a bounce after that, but that bounce is over and everything is now turning down.  This time what are they doing?  They are actually issuing more fake money.

They are just printing money by pushing a button and doing it electronically.  If you look at the central banks balance sheets, just in the last five years, the UK balance sheet is up four and a half times, same with the Swiss.  The Fed and the ECB’s balance sheet is up over three times, and that is nothing compared to what they will do in the next few years.

The only thing this will lead to is not an improvement of the economy, it will lead to a collapse of the currencies and a hyperinflationary depression.  The protests will get much worse as the economies turn down and unemployment increases.  This will create massive problems, that is a major concern for all of us, Eric.”