Embry - Western Central Banks Don’t Have 30,000 Tons of Gold

With the Fed saying they will continue with stimulus and gold hovering at the $1,550 level, today King World News interviewed John Embry, Chief Investment Strategist of the now $9 billion strong Sprott Asset Management. When asked about Peter Schiff’s comments earlier on KWN about the US defaulting Embry stated, “When you look at the financial condition of the United States at the federal level, at the state level and at the municipal level, to me I don’t see any way out of this. There’s too much debt, interest rates are far too low. If interest rates really reflected what’s going on, this risk in the debt and the risk of inflation, they would be hundreds of basis points higher and under that event the debt couldn’t be serviced. So there will be some form of default.”

Embry continues:

“I mean you can default by refusing to pay it like Argentina did a few years ago or you can default it by debasing your currency so aggressively that the debt becomes less onerous. The ultimate result of it is a hyperinflation and I believe that is the most corrosive thing that can happen to a society, just observe what happened in Zimbabwe recently, it just destroys society.”

When asked if he was surprised by the admission that the Belgian central bank had leased out 41% of its gold Embry replied, “It caught me a bit by surprise because I have been one of those individuals who has been adamant that the western central banks collectively have leased out or swapped a significant portion of their gold.

When they (western central banks) report having 30,000+ tons, that is not true. They may say they still maintain ownership, but they do not have it and they will never get it back. It’s been sold, it’s gone into the market and it’s gone. Ultimately I assume that gets settled up with cash, but for Belgium to admit it the other day, yeah I was taken a bit by surprise because it confirmed my thoughts on the subject.”

When asked if Jim Sinclair was right that there would not be an audit of US gold Embry responded, “I think he is. To me if I don’t have anything to hide, come and get it guys, have a look. So if the US is adamantly resisting an outside audit and it has for a long time, I think they are hiding something....

“I really don’t think there will be a voluntary audit of US gold because suspecting what I suspect, that would just blow the whole thing up immediately.”

When asked about the action in gold Embry had this to say, “I think the gold price is behaving very well given the fact there’s a lot of negativity from mainstream on it, and the fact that the anti-gold cartel is continually acting in the market to try to hold it under $1,550. It (gold) just keeps popping up, it’s like something being held under water, eventually it’s going to pop above the surface and it’s going to take out $1,556 with gusto. Then at that point we’ll have new closing highs very quickly.”

When asked about downward manipulation of the gold shares Embry said, “I think there is some outside force that is doing this. I’ve heard speculation that there’s a government driven algorithm to actively sort of make the gold stocks look terrible and keep people away from them. I certainly heard Jim Sinclair and Dan Norcini’s comments about the hedge funds driving gold stocks into oblivion.

I don’t understand because eventually how do you cover these things? The gold price is going to explode and these things are so cheap relative to the gold price. There’s only been one other time in my career when they’ve been cheaper and that was in 2008 when we had the complete panic, and see what they did after that, stocks recovered smartly. So they are going to recover again smartly, if hedge funds are doing this, they must have a death wish.”

When asked about the continued tightness in the silver market and if the manipulation can continue for much longer Embry stated, “You can’t, I don’t think you can. I think that one of the most tell-tale signs is the declining inventory levels on the Comex and the LBMA. One wealthy entity could come in and clean them totally out of every ounce of silver they have.”