Transcript

Craig: Greetings to everyone once again from Sprott Money News. This is your March edition of the Ask the Expert series. I'm your host Craig Hemke, and your expert for this month is Bill Murphy. Bill, you might know, is the chairman of the Gold Anti-Trust Action Committee, also known by the acronym GATA, and he's also the publisher/editor of the great website Le Metropole Cafe, which he has run since 1998. Bill joins us here today to field a few questions from Sprott Money subscribers. Bill, thank you very much for joining us.

Bill: Well, Craig, thanks for asking me, and it's great to hear from you and, of course, happy to do this. I'm one of Eric Sprott's biggest fans, so good to be here.

Craig: Well, let's just dive right in, Bill. We've gotten a handful of questions again from the customers of Sprott Money. This is their big opportunity to submit questions to the expert every month. And the first one gets right to an issue that I'm sure is near and dear to your heart and most everybody that follows the metals. This one comes from a customer named Bill. He wants to know: Why is it seemingly impossible to have an audit of the the amount of gold held within Fort Knox or the amount of gold said to be held by the U.S.?

Bill: Well, I'll refer this one to what my colleague, Chris Powell, said years ago, that United States would rather release its nuclear secrets than what is really going on with their gold supply and going on at Fort Knox and so on. And I think the last one's, reportedly, audit was somewhere around 1955, the Eisenhower administration, and I think it's because it's that big a deal. As a matter of fact, I know it is. And no matter what people try to do, they won't get anywhere. And nobody will ask, "Well, why can't we just have a simple audit? What hasn't been audited since 1955?"

And I think the answer today is that the gold is not there. I noticed just recently Donald Trump came out, who's running for president, said the gold probably isn't there. And I don't know if it's all gone, but we think a lot of it has disappeared. And so that's why you don't want to have an audit, because the dollar would collapse, and it would be a huge scandal and so on.

In essence, the United States can't sell any of its gold without an act of Congress. However, they can swap gold with other countries and sell the gold, so the other countries' gold would suppress the price. And we think that's what's been going on for years, and that's why we only have a fraction of the 8,135.5 tons we say we have. That's my convoluted way of giving the answer, why we won't get an audit and probably never will until the market blows up. Then I think things will change.

Craig: Fair enough. Next question comes from...I guess this is probably a Canadian citizen. There was some notes that went out, I guess, a few weeks ago that Canada had finally sold off the rest of its held gold. It was already down to only something like two metric tons, anyway. But they decided, at this time and place, to get rid of the rest of it. So Lenny would to know if you think there's any possibility in the future Canada might nationalize its gold mines as an attempt to rebuild its gold stockpile. And then, in conjunction with that, do you think there's any jurisdiction globally that is, I guess we'll call it safe, to store your gold?

Bill: Well, it's an interesting topic, because GATA's all about there's a gold cartel out there, and it includes the United States government, Fed, Treasury, Exchange Stabilization Fund, the Bank for International Settlements, and other central banks. And we first got on the map back in May of 1999. We'd only been in business for a few months and shouting about the manipulation when the Bank of England announced in advance, which no one has ever done, they were gonna sell half their gold reserves, something like 400 tons.

And it created a furor, because who wants to try to get the lowest price and tell somebody in advance what you're gonna sell. But they did, and that woke a lot of people up, including James Turk, who I have a great respect for. He said, "You know, GATA's got to be right. Nobody would do something like this." And then he had Australia get rid of its gold reserves, and then he had Canada now doing the same. And you wonder, "What the heck is going on, where these Western central banks are all getting rid of their gold reserves?" And of course, England did it back at $275 gold. It's proved to be a disaster.

Also, Australia and Canada are gold-producing countries. You'd think they'd wanna support major industries of their own countries, but that's not been the case. I think it's quite revealing to the extent that the gold cartel's reaches go out, in terms of the banking system and the rich and powerful and what they're willing to do. I don't know. It just doesn't make any sense unless you look at it from a GATA perspective.

When it comes from nationalizing it and Canada doing that, boy, I couldn't imagine something like that, because it's such a big part of Canada's resource industry. There's so much entrepreneurship going into that area. The government would just screw it up totally. I can't imagine that, nor can I imagine United States ever confiscating gold, for example. Who holds gold in the United States? It's so minor. The rest of the world would say, "Well, what are they doing and why?" So I can't see that.

In terms of safe zone, I don't want to get into the areas too much in which some of colleagues or people in the industry are experts on exactly where you should put your gold, and why, and how. I'm sort of simplistic about just keeping it someplace safe that you're comfortable in yourself, whether it's a basement or wherever, or it's in a bank. I mean, I'd think anybody would have time, in terms of concern, to go into a bank and get what they want out of their vault.

I can't imagine, again, at least here in the United States, all of a sudden this big decree about going into people's possessions in the banks. I mean, it can happen, and I would just be shocked, but I think you can see it coming. So I think just getting it under possession is important, and there's a lot of good places, like Gold Money and other areas, where you can have your gold and feel safe with it there.

Craig: That's, I think, a series of excellent points. Thank you. The next question comes from a gentleman named Bob, who describes himself as a grateful subscriber to Le Metropole since going all the way back before 2009. And his question deals with supply, because we all complain, and rightfully so, about the power of these paper markets and what a sham and illusion they are. But yet there has to be physical deliveries made at these paper prices, and there has to physical supply to meet those deliveries.

And so Bob's question ultimately is: Where the heck is this supply coming from? There are theories out there that the U.S. has some secret supply that they obtained after World War II, things like Yamashita's gold. Do you make much of that? Are you a believer in those theories, or do you think we're coming at the end of the supply train?

Bill: Well, first of all, let me thank Bob for his support, and most appreciated, Bob. To get to the question itself, what GATA's been all about, as I got into, is that the central banks have been secretly leasing gold and putting it into the marketplace with the bullion banks for years. That's where GATA got started. The central banks were supposed to have 32,000 tons of gold, when we said, "We don't think they have anywhere near that." And they're gradually getting down to an endgame, and it's making it tough to access. And that's why they're scrambling around, and raiding countries, and Germany can't get all its gold back right away.

I think the endgame really has started. It's what I call a process, and they're reaching a tipping point, and which what Bob's talking about is going to be a big deal, that they won't have the physical gold to meet the demand that's surfacing out there. And that's why it's going to be interesting that the raid we're seeing of late and especially today will be able to last. Today it affected the physical market terribly. It's gone from up at $12.60, $12.70 right to $12.17 today. Well, that's the physical price. The bad guys, as we call them, and their gold cartel was able to influence the physical market enough that that's where 90% of the transaction occurred today.

Now, my notion, many things are in the process of changing, and that's what the share action has been telling us. HUI wants them below 100 to 190, or something like that. They're running out, and that this is sort of one of their desperate last maneuver attacks to turn the specs. And as you've so astutely talked about, their specs are gonna get rated again. Sure enough, they have been. And they've taken the open interest of 510,000 contracts at a multi-year high to do that. That's what they've done. But, I think, getting back to what Bob's talking about, this is in a process of ending in gold.

Now, silver's been a whole different game. I mean, it's the worst acting market I've ever seen in 45 years. I don't even think it's a market anymore. It's just the price you see on a screen. I think what happened was...and this is just a theory, and people can throw it out, and I would understand that. I think when the price went from $16 to $50 in 2011, that the market was tight as can be. I got these reports from all over the world. Now, I think that J.P. Morgan was buying up the prices as it went up, all the way up. And you think, "Well, that was bad."

No, no, no, no. What they were doing was selling two to five times as much paper in the derivatives market, and when they were ready, they started to bomb the market. And we all know about the $7 raid when no one was there and so on. And so that they accumulated this physical gold, and they had been hitting the market whenever they wanted on the way down. But all of a sudden, the tightness of the market's disappeared these past years.

I think, maybe it's a hope, Craig, that, as they're having trouble with gold as we've seen so far this year, unexpectedly so for most people, they're finally getting to the point where that's going to happen to them in silver and that they're going to run out of their supply. They just won't have it anymore. Of course, nothing is matted so far. Silver just completed the prettiest-looking weekly chart you've ever seen in your life, finally got the $16 and getting ready to move.

But no, we're right back down this morning to $15 and change, which is $1.50 from the five-year low. That's about as nowhere as you can get. That said, to wind up, I think when they lose control of silver, it will be the most violent move-up, maybe, of any market in history. And I'm hoping that that'll be sooner than later, and $18.50 is my key. And then we're on our way towards $50 and then to $100 plus, and I know that would make Eric very happy.

Craig: Make a lot of us very happy. The next question from Justin is a bit of a follow-up to the supply issue. He's observing the decreasing concentrations of gold and silver in the mining industry after many years of mining. Do you think much of this kind of peak gold/peak silver idea, in that...? Even the Silver Institute's numbers show that we are consuming more than we've been mining over the last three or four years. Do you believe in the peak gold/peak silver idea, I guess, in the first part? And then two - and you've sort of touched on this already, Bill - is it ultimately a physical default of some kind that will bring down the paper markets?

Bill: Well, first of all, it's been reported that because the base metals have really tanked, that physical silver supplies finally started to go down. And I think obviously it's gonna be supported for the price down. I don't understand how a lot of these companies do it. I mean, from what I know, $23 is the average cost of production for many silver producers. I know First Majestic is much lower, I don't know, $16, $17, but even then, we're not even there. I don't know how they keep on going, because it's in a terrible way.

To get to the second part, yes, the only way gold and silver will ever do what people like yourself and myself think is coming - and we're talking about historical moves to the upside - is that the gold cartel will have to blow up. And that means a commercial signal failure, in which a lot of the smaller commercials will have to cover, because they've gone short and had too many price losses and so on, and the physical market takes them out.

It's the only way, because right now, as we speak this morning, specs are finally getting flushed out after this latest attack by the gold cartel. And they'll exit their positions. The gold cartel will cover. The moving averages start to turn, and we've gone through this cycle a zillion times. And I'm hoping it's sooner rather than later, and I think we have a shot for that, more than normal.

When the prices start going back up again and after the specs are cleaned out, the same process will start all over again. The specs will start to get lower again, and the gold cartel will start selling again. Until the physical market can take them out - and it couldn't do it today - it's never going to end, never. Now, I think they're gonna blow up, and it's gonna be huge. This is my opinion. That's what has to happen. Because you think that if gold goes back up to $1,300, the specs are gonna to start shorting? Not a chance in China, especially with the Chinese buying.

Craig: No pun intended.

Bill: No pun intended. So anyway, that's how I see it. Then I'm as optimistic as ever for the big picture, but short-term, this is another aggravating move, and so predictable, and nothing new under the sun. This is what they keep doing.

Craig: Yes, desperately attempting to make all of us weary in the process. A final question, Bill, and this, I guess, goes to the same point but from a different angle. This comes from Woody, and he states, "We always define the value of gold and silver as a measure of Federal Reserve Notes, U.S. dollars. If the U.S. dollar were to crash, no longer be the world's reserve currency, that type of thing, would that be a key that could take apart the paper markets? And from there, how would we determine a value of gold and silver?"

Bill: So let's see. Basically, it gets into why they kill gold in the first place. Gold is widely viewed as a barometer of U.S. economic health. It goes up, it's bad. It goes down, it's good. That's just the way it is. Been this way for as long as I can remember. Think about headlines. Anytime gold goes up, it's always bad for business. It's bad for the money and power in this country. Too much inflation, a crisis, the dollar's getting it, it's negative. So they want that barometer down at all costs, and that's what they've just done again. They want to diffuse the situation. So that is their thing. That's why they do it.

And in terms of currencies, right now, I think it appears to many that it's just a race to the bottom. And it's a question of, "Jeez, what's any good?" And it's a complicated subject, but I think that this is one of the major reasons gold and silver are suddenly of interest, so some big league players that really haven't been interested until recently. And things have changed in that regard, and I think people see that the Plunge Protection Team is helping to hold up our stock market, and the gold cartel's taken their price down. There was no reason for gold to get buried today.

Of course, that's just after what they did following the terrorist attacks. They figured this is a good time to move, with April gold options expiring early next week, and so they've done it. And so, again, they're gonna keep doing it until they blow up. In terms of the currencies, again, it's which one is worse. We hear this conversation all the time. And I think, again, this is why they're trying to keep gold from going any place, because they want its [inaudible 00:17:13] remain in U.S. dollars, but a lot of us think that's gonna end. And that's in the process of ending, too, but it's taking forever.

Craig: Bill, thank you so much for your time today. Again, we've been speaking with Bill Murphy, the chairman of the Gold Anti-Trust Action Committee and the proprietor of Le Metropole Cafe. A lot of valuable information. Bill, thank you so much for spending some time here with us at Sprott Money News.

Bill: Thanks much for calling me, and anytime, it's my pleasure.

Craig: And from all of us at Sprott Money News, thank you for listening.