James Turk on gold and silver

James Turk: Central Banks Are Losing The War to Suppress Gold & Silver Prices

Zero Hedge,

26 January, 2013

James Turk: Central Banks Are Losing The War to Suppress Gold & Silver Prices

My guess is that 2013 and 2014 are going to be big up year for the precious metals, but we still have to contend with the central planners and the various government policies, which have been actively trying to keep the gold and silver prices from reaching fair value. The central planners are losing the war. They may win an occasional battle or two, but they’re losing the war, and eventually gold and silver are going to go higher.

So predicts James Turk, founder and Chairman of GoldMoney.com.

From James’ perspective, gold is not an investment. It’s a sterile asset, meaning it does not generate income. What it is, is money. Its function is to store wealth.

But money, like investments, can be overvalued or undervalued. And what we’re witnessing on the world stage is a gross mispricing of money as central banks engage in depreciation of their fiat currencies via inflation (i.e. money printing).

The process causes a transfer of wealth from those holding overvalued money to those who hold undervalued money. That’s what’s been going on for the past decade as the price of gold has steadily marched upwards versus fiat currencies.

But this process is not efficient. Mass awareness of this wealth transfer is low, so confidence in paper currencies is still high, supporting their perceived value. Market intervention by central banks and other parties conspires to keep the prices of precious metals artificially low and suspect.

This maintains an arbitrage for individuals to buy gold and silver at a discount to true value, which James believes will be slowly realized in full over the next several years as the bull market in precious metals approaches its third and final phase.

A factor in this rise will be the increasing fragmentation of coordination among the central banks. Increasingly, central banks outside the influence of the US’ Federal Reserve are treating the precious metals as true money, and becoming net buyers of bullion for their reserves.

Ultimately, Turk predicts the price of gold will move to somewhere between $8,000-10,000/oz, and that we'll see even higher price appreciation in silver.

The way markets normally work is, after you do have a big move, you get a correction. Even over the past 12 years, if you look at gold, you had big moves in 2005, 2006, and 2007 where you were in some years generating over 20% appreciation in gold. Then you had the correction in 2008. Even though that was a correction, gold was still up that year. Then, in 2009 and 2010 and the earlier part of 2011, you had again big moves. Then you had the correction where basically they moved sideways. My guess is that 2013 and 2014 are going to be big moves on the upside, because what’s important here is not so much the price of gold, but whether it’s a good value.

The proper way to manage a portfolio is, you move assets that are overvalued out of your portfolio and you concentrate on assets that are undervalued. That’s true regardless of whether you’re talking about investments or money. You want undervalued forms of money. You want undervalued investments. I use a couple of mathematical formulas which I’ve written a lot about, one being the Fear index and the other being the Gold money index; by both of those measures, gold is still very, very undervalued, as is silver, for that matter. Silver is even more undervalued than gold. My expectation is that these undervalued assets will continue to rise in price, because the market doesn’t like levels of overvaluation or undervaluation. The market is always constantly changing, moving money out of overvalued assets and moving into undervalued ones. And that’s what we’re basically seeing in the precious metals: people are moving out of overvalued fiat currencies and moving into undervalued gold and silver.

My guess is that 2013 and 2014 are going to be big up years, but we still have to contend with the central planners and the various government policies, which have been actively trying to keep the gold and silver prices from reaching fair value. The central planners are losing the war. They may win an occasional battle or two, but they’re losing the war, and eventually gold and silver are going to go higher – assuming that governments and central planners and central banks still continue to follow these same policies that they’ve been doing, which is defacing fiat currencies.

An interesting thing is that when we saw the price drop in gold and silver at the end of 2012, the demand for physical metal rose tremendously because people recognized that these assets are undervalued, and if they’re going to be sold down to such cheap prices, they may as well just pick them up and continue to accumulate them. So it certainly has a perverse affect when the central banks intervene. In fact, as we’ve noted, gold has risen 12 years in a row against the U.S. dollar – double-digit rates of appreciation. But I guess the best way is using an analogy. If you've got a pot of water boiling on the stove and it’s bubbling away, every once in a while you have to release or pull off the lid to let a little bit of steam out, and then you put the lid back on.

That’s sort of what the central planners are doing. Every year they release the lid, and gold on average has risen over the last 12 years by 16.8%. Then they put the lid back on. One of these days they're not going to be able to put the lid back on, and you're going to go into the third stage of a bull market where gold just keeps rising and rising and rising because confidence will be lost in the currency. I think that’s what we have to be focusing on.

I can’t say that trust between central banks is waning, but you have to recognize that there are two categories of central banks: There are central banks that are in the U.S. circle of control and dominance, and then there are central banks outside the circle of U.S. control and dominance. The ones that are outside of the U.S. control and dominance are accumulating physical gold. The ones within the U.S. control tend not to do that, although it’s interesting that Germany, Netherlands, and now Austria, too, are talking about bringing their gold back.

It’s quite clear that a lot of promises have been made, particularly by politicians and most governments around the world, and those promises cannot possibly be fulfilled. A lot of those promises are going to be broken. Particularly when it comes to the area of gold, a lot of central banks are relying on the promises of other central banks. Oh, yeah, we’ll be good for the gold if you ever ask for it. Those promises are likely to be broken as well, as the demand for physical metal continues to grow. Whether it’s going to accelerate in 2013, 2014, I don't know. But, my guess is the demand for physical metal is indeed going to accelerate over the next couple of years, because I’m looking for serious financial problems to be hitting. 

Max Keiser in the death of the dollar and 'Brown's bottom'

These two videos have been reposted on Max Keiser's website and are of considerable interest from a historical viewpoint.

Here they are , with Stacy Herbert's comments...

Death of the Dollar (2006) and Brown’s Bottom (2008)

This is an original news feature we made for Aljazeera English in March of 2006. Due to a delay in the launch of the global channel, however, the film didn’t air until launch week of December 2006. You will see James Turk of Goldmoney.com and Bill Murphy of GATA six years ago here discussing gold manipulation and why governments do this. Not one other television news media anywhere in the world had covered this as we had at that time; and they wouldn’t for another five years:

Here is our documentary on Brown’s Bottom made in March of 2008; we ended up being at the Bundesbank on the Monday after the US Federal Reserve had slashed interest rates by 75 basis points the Sunday night before. We were there to witness the chaos and Axel Weber that nobody from the bank could speak to the press, ‘especially not about gold.’ It was in response to this film that the Bundesbank admitted to Rob Kirby that Germany’s gold was, in fact, in New York:

Inflation vs deflation

Robert Prechter and James Turk on inflation vs deflation

Robert Prechter of Elliott Wave International discusses inflation and deflation with GoldMoney's James Turk in this podcast. They also talk about GoldMoney, and the advantages of owning allocated gold stored at secure vaults.

Both men differ on the question of whether or not inflation (defined as a rising price level) or deflation (when prices fall) will be the dominant economic trend in the years ahead. Prechter argues that governments and central banks will be unable to prevent a big collapse in financial markets, owing to debt defaults and massive contractions in bank lending. In contrast, Turk thinks that America is heading for hyperinflation, owing to the US government's unwillingness to change its spending habits and the Federal Reserve's continuing monetisation of government deficits.

However, they agree that regardless of whether or not deflation or (hyper)inflation prevails, owning gold is still desirable -- provided that it is held in allocated form in secure storage. James and Robert both see gold as insurance against financial chaos, and as a means of protecting yourself from a collapse in the value of stocks, bonds and real estate.

Where is gold going in 2012?

James Turk, "We could easily go over $2000 per ounce" for gold in 2012

RT

This is the web exclusive of our Capital Account interview with GoldMoney founder James Turk, from Wednesday, January 4th 2012.

In this web extra, James Turk speaks makes a prediction about where the price of gold will head in the new year, along with his outlook for central bank printing, and the problems in europe in light of increased liquidity hoarding by banks at the ECB's deposit facility.

James Turk also reminds us that nothing moves up always and forever, and the type of correction we have seen in gold recently is normal, and a good buying opportunity.

Chris Martenson Discusses The Future Of Europe And Of The Global Economy

Zero Hedge,

4 December, 2011

In the following video Chris Martenson - economic analyst at chrismartenson.com and regular guest contributor to Zero Hedge, and James Turk, Director of the GoldMoney Foundation talk about the problems facing the eurozone as well as the global economy. 

Chris Martenson points out that the whole world simply has too much debt. This is why he believes that there won’t be a real solution to the euro crisis. 

The big question will rather be who will take losses on the debt, which can’t possibly be repaid.

The lack of political leadership and unwillingness to accept reality is contributing to this crisis. Additionally, the monetary tools central banks have traditionally used to revive economies are starting to show less and less effect. 

In Martenson’s view, the financial sector has become way too large and interlinked across borders, so that a default by one country could bring down the whole financial systems, because credit default swaps would get triggered and could bring down the writers of those derivatives.

James Turk mentions that today, commercial banks as well as central banks are leveraged at unsustainable levels. While both agree that it makes sense to get back to less risky traditional banking and a sound money system, Martenson raises the question of how it will be possible to bring the leverage down to prudent levels again and how to get rid of the huge amount of complex derivatives. 

That said, Martenson argues that the gold standard has been proven to be a working monetary system with automatic leveling functions. As a result of the coming structural changes to our monetary system, both men recommend owning tangible assets. They point out, that those who act first have a great advantage.

Martenson talks about the misallocation of capital, which occurs when money is being mispriced. The debt bubble was allowed to grow over the last 40 years and is now starting to burst. 

Due to cheap money, speculation and leverage have grown enormously. The tech stock and housing bubbles were the latest examples of that. He hopes that we will get rid of the unrestrained money systems with all its imbalances and return to some sort of gold standard system. The accumulation of gold by central banks hints to the fact that gold will play a bigger monetary role in the future.

Talking about European Central bank policy, Martenson speculates that the ECB could be revealed as a “paper tiger”, that is unable to stop speculation against European bonds. 

This could lead to an escalation of the euro crisis if the ECB does not follow the unprecedented example of the Fed in buying up massive amounts of sovereign debt, even though this violates its rules. 

He wishes more people took the time to understand basic economics; the illusion that government can pay for something without having to collect taxes in the same amount has been created by the constant accumulation of debt. 

But since debts can’t be grown forever we are now in the early stages of finding that the idea that we can always expand and that debt doesn’t matter is wrong. Martenson is afraid, that our society as a whole is not prepared for this paradigm shift yet. He believes that resource efficiency and access to resources will be much more important in the future.

and here is Chris Martenson's presentation at the Gold & Silver Meeting in Madrid

Lessons of history

'When Money Dies' Author Adam Fergusson And James Turk Discuss (Hyper)Inflation In The Past, In The Present And In The Future

Highly recommended video.

Zero Hedge

When it comes to discussing monetary history, and specifically what happens when it all goes horribly wrong, there are two must read tomes: one is "The Dying of Money" by Jens Parsson (pdf link) and the other one is "When Money Dies" (pdf link) by Adam Fergusson. Today, we are lucky to bring to you a must watch interview between James Turk of the GoldMoney Foundation and the author of the former, Adam Fergusson. 

They discuss the fateful decisions that led to hyperinflation in post-First World War Germany, and how central bankers as well as ordinary members of the public today would be well advised to heed this warning from history. 

Fergusson discusses how the hyperinflation affected different groups in German society in different ways – with debtors benefiting and huge numbers of middle-class savers wiped out. Riots, corruption and political extremism were just some of the malignancies encouraged by the hyperinflation. 

He points out that those who held hard currencies as well as people who held tangible assets like gold and silver were in-large part protected from the worst economic consequences of the hyperinflation. In his words: “gold remained at all times in Germany the measure of what was important to them.”

James and Adam discuss whether or not today there is any way for governments in the developed world to repay their huge debts. Both men conclude that inflation is the only politically viable method of repudiating these unmanageable obligations. 

Fergusson highlights the importance of velocity and the demand for money in determining whether or not inflation turns into hyperinflation – though points out that this tipping point can take a surprisingly long-time to arrive; in Germany, people kept confidence with the rapidly devaluing mark throughout the First World War, despite clear signs that the country was heading for a currency crisis.

Fergusson thinks that we are heading for high inflation in many countries, but is doubtful that Weimar Germany’s nightmare currency collapse can be replicated in a sophisticated modern economy. He concludes with a quote from Jean-Claude Juncker, prime minister of Luxembourg, who recently commented with respect of the sovereign debt crisis: “we all know what has to be done; what we don’t know is how to get re-elected once we done it.”