Investment strategist John Embry sees nowhere for the price of gold to go but up

Author: Geoff Candy
Posted: Wednesday , 21 Apr 2010

GRONINGEN -

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"If gold isn't up at least $500 in the next six months, I will be surprised," says, John Embry, Chief investment strategist at Sprott Asset Management.

Speaking on the Mineweb.com Gold Weekly podcast, Embry said that the price of gold is on the rise for two main reasons.

The first of these is the rapid increase in sovereign debt among many Western nations and the risks attached to it. Embry says while Greece is the one at the top of the page right now it is just one of many countries or states including the UK and many in the Mediterranean and the US which have equally as serious debt issues.

He adds "We are in the early stages of what I think might turn into some sort of a hyper-inflationary condition because there are not enough savings in the world to even remotely service the amount of sovereign debt that is going to be created in the next few years. So you are going to see the creation of paper money the likes of which we have seldom, if ever, seen in history. So, as the value of the paper money goes down because of its proliferation, by definition, gold, which is in limited supply, the price of it will go up in these paper currencies.

"We have gone through a period of disinflation, certainly since about 1980. It's over. We are heading into a period the likes of which we have never seen certainly in our lifetimes but maybe the world has never seen before."

The second significant factor for Embry is the difference between the paper gold market and the amount of physical gold around to cover it.

"If you have short positions and paper gold to the extent that you have right now, the whole situation is distorted. The fact is, and I think there has been some really good work done on this recently, I mean there is so many paper claims on each good delivery bar, that if everyone decided one day that they didn't want their paper gold, they wanted the gold that was supposedly underlying it and they demanded it. It would just blow the top off the market and I think, before this is over, that will occur."

He adds, "I think that North America and Europe are going to become less and less a factor in the market, right now the price is being controlled in the paper market on the LBMA and the COMEX. I think that is in the process of changing, if the physical market takes over, as I think it will, there is nowhere for the price to go but up."

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=103033&sn=Detail

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