Egon von Greyerz, founder
of Goldswitzerland.com (Matterhorn Asset Management AG) and member
of the board of directors of Goldbroker.com published an article
headlined "Disregard
current manipulation of precious metals" :
Every day 5,000 tons of silver
and 650 tons of gold are traded in the paper market. This is an astonishing
25% of annual production of each metal that is traded daily. Currently there
is clearly intervention to hold down the price of gold and silver at every important
level. Like all interventions, this one will fail too. The paper market is
massively short and would be incapable of delivering even a small fraction of
physical gold or silver against their commitments.
So what we are seeing is a
short-term correction in the continuous rise in gold and silver against paper
money. The correction is likely to be short-lived and eventually lead to new
highs.
But investors should not
really be concerned. Gold will continue to reflect the escalating deficits
and the never-ending money printing by governments.
We know that no government is
capable of maintaining any serious level of austerity. This will
automatically lead to rejection by the voters and loss of power. So
governments worldwide will continue to spend money they don’t have and print
endless amounts of it. The situation is the same in the US. Neither candidate
is capable of taking any measure that will cut the escalating deficits. Since
Bernanke became chairman of the Fed in 2006, the Federal Debt has doubled
from $8 trillion to $16 trillion! This makes Bernanke the most productive
person in history. But this is only the beginning. There is nothing that will
change the trend (as shown in the chart above) of rising deficits and rising
gold.
We are reminded every day of
the fragility of the financial system. The failure of the bigger names
(Lehman, MF Global, Sentinel) are well-known but we hear of smaller brokerage
houses failing around the world that is not publicised.
In the next few years, many
institutions will fail. And it always happens totally unexpectedly. This is
why it is absolutely critical to preserve wealth by holding major assets
outside of the financial system. Major fortunes will be lost and it will be a
question of who loses the least. One of the few assets that will continue to
reflect the destruction of paper money is gold. But it must be physical gold
only stored outside the banking system in the name of the investor with
personal access to the gold.
Switzerland now has two gold
initiatives. One of them is to create a Gold Franc which will be accepted as
legal tender in parallel with the paper franc. Switzerland has a
long-standing tradition in gold both from the point of view of private
ownership and refining of gold. Four of the top six refiners in the
world are Swiss. This gold tradition makes it more probable that this
initiative is passed by parliament. Initial soundings are positive. If
gold is accepted as a parallel currency, this would eliminate any small risk
of confiscation of gold in the future in Switzerland.
