The Real Story Behind Gold Shortages | Dave Kranzler

Craig Hemke (00:18)
Hello again from SprottMoney, news at SprottMoney.com. It is time for your February Ask the Experts segment. Boy, there's a lot going on in the gold market here in February. We need all the experts we can get. I'm your host, Craig Hemke, and joining me this month is my good friend, money manager and analyst, Dave Kranzler. You can find Dave's great work at Investment Research Dynamics. He writes a couple of different newsletters and has been following gold.

even longer than I have. And it's great to always get his opinion. Dave, thank you so much for taking some time to join us.

Dave Kranzler (00:54)
Craig, thanks for having me on again. I will say though, you're making a big assumption calling me an expert. Caddyshack.

Craig Hemke (01:02)
come on. Now don't sell yourself short, Judge. You're a tremendous slouch. that right.

and again, before we get started, Sprott Money is your sponsor of all this. So you want to, there's going to be more stuff coming this month in March, April, subscribe, like whatever channel you're watching first and foremost, so you don't miss anything that we put out. But then remember Sprott Money is a bullion dealer and a bullion storage company.

So you want to keep them in mind anytime you're in the market. Right now they've got a pretty cool promotion going on called the R-Choice Gold and Silver Box. If you go to SprottMoney.com, check that out. You click the R-Choice product and Sprott Money will hand pick the item for you, ensuring you get the best price from whatever is available that day. Each piece will be a minimum 99.9 % pure gold or silver, giving you the best value for your dollar. And of course free shipping and insurance on anything over $500 too.

So visit SprottMoney's website and you can explore all your options today. And again, always keep them in mind and give them a call too at 888-861-0775. All right, said expert Mr. Kranzler, let's do this. What folks don't know is Dave and I have been friends for long time. A lot of us in the gold community know each other and you and I and Chris Palagada started emailing each other.

just in our little tech stream back in about the latter part of January, so three, four weeks ago. And we all kind of were sniffing out a rat like we were being gas lit, I think, at about the same time. The spread blowout between spot price and the futures price has gotten wide, meaning no one has the confidence to arbitrage it. You're hearing all this, giving stories about all this massive flows of metal into the US and into the COMEX.

Delivery delays in London, all this kind of stuff. Dave, let's start with the, what seems like gaslighting. Do you attribute all of this current situation to the threat of tariffs from President Trump?

Dave Kranzler (03:13)
If that's the case, where are these said tariffs? I mean, you know, it's not even in Trump, what he deferred the tariffs, he slapped on Mexico and Canada for at least a month. And it's not even clear exactly what was being tariffed. So, and I guess he's put tariffs on what steel and there's aluminum. Which is bad for

Craig Hemke (03:18)
Right.

Luminum.

Dave Kranzler (03:41)
companies like Home Builders and Auto Makers. But the thing of it is, I'm sure the cent or Besson or however you pronounce the secretary of the treasurer's name, I'm sure he would take them aside and say, you can't put a tariff on gold. It's a tier one bank asset, reserve asset. And you can't put a tariff on silver because that's a strategic metal, even though it's not officially declared a strategic metal. mean, the military or...

Defense companies use a lot of silver in the production of missiles and other, you know, all other military equipment. So I just, I just don't see a tariff on gold and silver being, being likely not even pro you know, possible. So.

Craig Hemke (04:28)
Has it even, have they mentioned the metals ever, and silver ever specifically?

Dave Kranzler (04:33)
No.

Craig Hemke (04:35)
So, so Dave.

Dave Kranzler (04:37)
And here's the other thing, I mean, you know, if you put a 20 % tariff or 25 % tariff on gold and silver, mean, people are still going to buy it. You know, it's still going to come into the country. I mean, look how much more everyone's paying for gold and silver now than they were a couple years ago.

Craig Hemke (04:57)
Good point. Good point. So, what is going on? Why is it just unsophisticated financial media that never really pays attention to gold anyway and so they just glam on to the official line of tariffs and everybody just starts spouting it? Or are they gaslighting us so that to not cause a delivery? What do you think's going on?

Dave Kranzler (05:19)
Well, mean, it's, you know, unsophisticated financial media. mean, the media is just a hand puppet for the elitists anyway, right? So, you know, they're just parroting the narrative that the script that's put in front of them and that they're told to report. So, and none of them know how to, I mean, we can't even know for sure ourselves, right, what's really going on.

Craig Hemke (05:31)
Yeah.

Dave Kranzler (05:48)
because the powers that be intentionally keep the flows of physical gold as opaque as possible intentionally. I mean, just look at what China's reporting as their central bank reserves versus what we know they really probably are. So you can't know the truth for sure unless everything gets exposed wide open for everyone to see.

You know, but you can follow footprints in the snow. And in my opinion, what's going on is a massive shortage of good delivery, 400 ounce physical bars in London. And, you know, the indication of that was the Mickey Mouse with the Bank of England rolling out their stooges, telling us, yeah, well, we're.

You know, there's a lot of 400 ounce bars being shipped to Switzerland, refined into 100 ounce bars, and then shipped over to the United States ahead of the terror, you know, that whole Mickey Mouse. But you've had, ever since the US seized Russia's Western Central Bank assets, you've had a large scale movement whereby all these central banks that are buying gold in the East, they're asking for delivery of it.

not being held, not delivery into London vaults, but repatriated, right? And so I just looked at that and I'm like, it's inevitable that they're going to wear down the supply of available good to deliver bars in London. I mean, even India, which had been keeping its central bank hold in London, has started repatriating. They've already repatriated a couple hundred tons. That's a lot of, even Poland. I Poland, a lapdog of the US essentially, and they're repatriating their gold.

Craig Hemke (07:11)
Mm-hmm.

Dave Kranzler (07:36)
So, you know, I think that's kind of worn down the available supply. And now you've got what you're left with is this web of paper claims on bars in London and bars in New York. And, you know, more than likely there's multiple paper claims per bar.

Craig Hemke (07:55)
And which presents an issue because the system has always been this kind of fractional reserve system with just-in-time delivery at that derivative price. know, Dave, I think you're right. Those are two dots we can connect. The first weekend of March in 2022 when the U.S. froze Russia's foreign held foreign currency reserves and kicked them out of Swift. And it was in 2022.

that central bank gold demand surged over a thousand metric tons and it has stayed there annually now three years in a row. So I guess Dave, the LBMA you mentioned their little webinar they put on the Bank of England's news conference after their most recent meeting. They were all sitting there trying to tell everyone, we got all kinds of gold. We got the Bank of England gold. We got the ETF gold. None of which you would think is for sale. Could they be out? Are they out of?

Gold freely able to deliver. Is that the source of these delays as reported by the Financial Times?

Dave Kranzler (08:58)
Again, mean, we can only try to put together a picture based on the information that's available to us to look at. it's not a lot. in my opinion, I think what's happened is over the last several years, central banks lease out their gold bars to bullion banks when the bullion banks need those bars for liquidity.

Craig Hemke (09:07)
Mm-hmm.

Dave Kranzler (09:27)
make deliveries into Asia and India. And let's not forget that outside of the central bank buying, the Indian public consumes about 800 tons of gold a year. I think the Bank of England kind of got caught where they've leased out gold bars that weren't specifically theirs to lease out, thinking that no one ever asked for.

for the actual physical delivery of these bars. So we'll just assure them that they're in our vault. And I think they're having trouble sourcing bars on the open market. So my guess is they have to wait until the gold is refined into 400 ounce bars that then get delivered to the Bank of England and then that they can turn around and give to the entities that are asking for delivery of those bars. That's what I think is really going on.

And interestingly, I'm sure you follow the work that Robert Lamborn does for GATA. And he tracks the monthly amount of gold swaps from the BIS. The amount of gold swaps from the BIS has taken a huge nosedive. It was up to close to, I want to say 500 tons at one point within the last year. it's well under 100 now.

Craig Hemke (10:39)
Hmm.

Hmm.

Dave Kranzler (10:51)
what I

think is going on. So the BIS would swap out their 400 ounce bars for whatever bars the central banks can put up as collateral so that the bullion banks, so that then they can turn around and lend it to the bullion banks for delivery purposes. And so if the BIS is pulling back that drastically on the gold swaps,

Either they're out of gold bars also to use for swaps or they're just like, whoa, let's be careful on how much of these 400 ounce bars we swap out because we might not get them back.

Craig Hemke (11:31)
Right, right. Dave, let's transition then back to the U.S. where again, because of these alleged tariffs, that's what we're told. All of a sudden we're having these record flows of gold into the U.S. whether it's from Switzerland, whether it's even from Singapore. All of this gold is flowing to the U.S. Record, and we always have to do this, deliveries.

On COMEX that here in the delivery month of February might reach all the way up to 240 or 250 metric tons on, you know, which is blow away all the records and whatever has happened in a delivery month before. So all this gold's flowing into the U.S. again, allegedly ahead of tariffs to shore up the COMEX derivative market. That's what they're telling us. And then you're getting into this now.

Wait a second, there's this movement to find out how much gold is actually in Fort Knox and in what kind of shape it's in. There's discussions on financial TV every day about whether the price of gold that the US carries on its balance sheet should be marked to market. What do you make of all this? Are all these things connected or are they just independent happenings?

Dave Kranzler (12:48)
That's a good question. I don't know. What I find interesting is if all these entities in the US want gold bars, why isn't any of it leaving the COMEX?

Craig Hemke (13:02)
Right, yeah, because you get those reports every day.

Dave Kranzler (13:04)
That's right. And if the Fed is going to assure us that the gold that it's supposed to be safekeeping on behalf of the United States Treasury, on behalf of the US taxpayers, why won't they allow an independent third party audit of Fort Knox, the Denver Mint, and the deep storage gold that's at West Point?

Because a lot of people don't realize this. Almost half the gold that was in Fort Knox has been moved to various locations. You know, most notably the Denver Mint and West Point. And that was what triggered the Germans repatriation of their gold. I don't know if you remember, they originally asked for over 600 tons. Because what happened was there was a movement over there at the time where they were getting pressure from the public to repatriate their gold.

Craig Hemke (13:40)
Yes.

Mm-hmm.

10 years ago.

Dave Kranzler (14:03)
And

yeah, and so they requested to send a delegation over to inspect the gold in the vaults that the Fed was holding, right? That was the 1500 tons that they moved over here after they got their ass beat by Russia in World War II. And they were worried about getting invaded by Russia. And of course, when countries invade another country, one of the first things they do is go take the gold.

And they were denied. said, the Fed said, well, we can let you into one vault. then the conversation and then that's what triggered the repatriation request. And the Fed wasn't didn't want to send them, you know, the amount they requested. They settled on 300 tons over seven years. And I think it was eventually returned. In three or four years, something like that, but it also wasn't the original bars that were sent over.

Craig Hemke (14:54)
five. Yeah.

Right,

wasn't the original bars, it was like brand new bars and stuff.

Dave Kranzler (15:03)
Well, also coin melt, know, not bars that aren't good to deliver. So, you know, that's another sign that you look at and you say, you you start to question whether the gold that's supposed to be in these vaults that's owned by the treasury is actually even there. So, and again, it's one of those things we can never know the truth unless they open up the vaults and allow an independent third party audit that is

Craig Hemke (15:06)
and they tried to force those back.

Right.

Dave Kranzler (15:33)
you know, visibly available to the public.

Craig Hemke (15:36)
What, what do you think, Dave? mean, even if the full 8,133 metric tons are there and not withstanding provenance and you know, who actually owns it and that kind of stuff. So much of that is coin melt bars from the thirties at 90 % purity that it's already overestimated by five or 10 % because if you were to all refine it again, you wouldn't even have 8,100 metric tons. You maybe have 7,500 metric tons.

Dave Kranzler (16:06)
That's right.

Craig Hemke (16:07)
So what do you think is, I mean, if it came down to brass tacks, I mean, I'm sure there's gold in Fort Knox. I mean, you can go there and take some pictures of it, how much really is, I mean, if they actually did an audit, what would you think they'd find?

Dave Kranzler (16:24)
Man, I have no idea. What we do know is that a lot of the Fed's gold was used to honor the Bretton Wood agreement that foreign buyers or treasuries could redeem their treasury certificates for gold at the Fed. Charles de Gaulle did the math and he's like, they've issued more treasuries to foreigners than they have gold. And he started doing that.

Craig Hemke (16:26)
Right, I guess good answer.

Hmm.

Mm-hmm. All right.

Once you go.

Dave Kranzler (16:54)
And then there were rumors that the Swiss were going to also do the same thing. And that's what really triggered the closure of the gold window. I honestly, I mean, it's, it's impossible to know, you know, what's there, how much, and in what form.

Craig Hemke (17:03)
Mm-hmm.

Let me ask you one last question. As we record this here on the 20th, we were really picking up lot of momentum earlier this week, last evening, what day of the week is this now? Wednesday. President Trump was on Air Force One. He goes, yeah, we're going to go in, we're going to audit the gold. And if we find out, you know, we're missing any, there's going to be hell to pay, something like that. And gold's rallying. then the secretary of the treasury shows up on Bloomberg this morning.

And says, Oh yeah. You know, when I was talking about monetizing assets, I wasn't talking about gold. Uh, we're talking about other stuff. Oh, and furthermore, we're not going to revalue the goal. We're just going to keep it at $42 on the balance sheet. Um, let's set that aside and figure that who knows who he's speaking for a lot of what I've always heard, Dave is, well, you can't man. If they say gold's worth

$3,000 an ounce on the books or $10,000 an ounce on the books. That would be so inflationary. They can't possibly do that. Would it be, you know, we created $5 trillion from thin air and fed it out to the public after COVID and sure CPI spiked to 9%. But this, this would be the same as that. mean, would it, what long question. Would it really be that

that horrible of a thing if the US government suddenly marked that goal to market or a couple multiples higher.

Dave Kranzler (18:51)
Well, I mean, what would be the purpose of doing it? You know, they can they at this point, they can still issue treasuries and sell it to foreigners who are a major portion of the entities that are financing our deficit. I don't you know, if they tried to do a gold backed treasury bond, I don't think countries like China would believe it. They wouldn't buy that bond until they got to see the gold itself.

Craig Hemke (19:00)
Yeah?

Dave Kranzler (19:20)
verify that it's there. And so I think, you know, would it be, I don't understand why it would be inflationary unless they were able to issue a lot more treasury debt against it because, you know, the issuance of treasury debt and government deficit spending in and of itself is inflationary. But where inflation comes from, that the primary source is when you devalue the currency by printing it.

Craig Hemke (19:20)
Yeah, yeah, yeah.

Dave Kranzler (19:46)
at a rate that's in excess of the wealth output. And that's what's been going on for over the last year. mean, most people aren't paying attention to it, but M2 is, well, as of the last report, which was, I believe, the end of December, because there's a two month lag in when they report it, M2 was near an all time high. And my bet is at this point, it is at an all time high. And that's where inflation comes from, not from,

the treasury revaluing the assets out of its balance sheet.

Craig Hemke (20:17)
Yeah.

Yeah. Well, I was all hot to trot a couple of days ago thinking all these pieces connected, you know, that they were going to revalue. were going to audit what they had. They were going to revalue the gold and then issue the gold back treasuries at 50 years to fund the sovereign wealth fund. thought I had it all figured out Dave. And then I wake up this morning and the actual people that have the power to do this just shot me down overnight. We'll see.

Dave Kranzler (20:41)
Well,

my bet is the sender Besson, whatever he probably knows. He might know the truth about what's really going on. I don't know. and we know, we know Trump likes to blow a lot of smoke, you know, not live up to a lot of it. So I haven't.

I never put much stock in the idea that they would actually audit Fort Knox. Great. Are you going to believe Trump if he goes to Fort Knox and comes out and says, that the gold's fine, it's there. mean, Mnuchin, Steve Mnuchin, when he was Trump's treasury secretary in his first term, he did that. Remember? He visited Fort Knox, walked out and made a big media production. The gold's there. It's fine. You know, I mean, in the court of law, there's rules of evidence and someone's word.

making an assertion like that without actual proof is, is, you know, it's, it's hearsay hearsay evidence. Your say evidence is not allowed in court except under very, very narrow circumstances. And so that that's all this is right now. I mean, you know, this is one of my favorite examples. So after the Comex, after the CME bought the Comex and

Craig Hemke (21:42)
Diction.

Objection! Hearsay!

Yeah, that's right. Yeah.

Dave Kranzler (22:06)
I don't look at them all the time now. I have been lately because it's getting interesting again. I used to look at the vault reports every day back, you know, 20 years ago. And after the CME bought the COMEX, I believe it was maybe 2008. Not too long after that, all of a sudden a disclaimer started appearing every day on the warehouse stock report. The information in this report is taken from sources

believed to be reliable. Now those are the banks that operate the COMEX. However, the Commodity Exchange Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only. So that did not exist when the CME didn't own the COMEX and it exists now and it's been on there every day since they put it on there. So...

Craig Hemke (22:49)
Yeah, they do.

Dave Kranzler (23:04)
You know, I think the CME also knows what's really going on and knows the truth. And a disclaimer like that tells me that report doesn't show, is showing us something that's not verifiable or true.

Craig Hemke (23:09)
Right, right.

At end of the day, get some gold. If you already have some, maybe get some more and get it in your own two hands or store it with a trusted company, so you can get it at some point in the future. The lesson, I mean, it's all laying right in front of you. I mean, we may be scrambling trying to connect dots, but the dots are there no matter how you connect them. And we will see where this all takes us. Dave.

One last thing as we wrap up, know a lot of folks follow the mining shares and you do a great job as a mining share analyst and your primary job mining stock journal. Tell everybody where they can find out a little bit more about that.

Dave Kranzler (23:57)
Thank you.

Sure, so my blog, InvestmentResearchDynamics.com has a link at the top. You just click on that and it tells you all the details. I release a new issue every other Thursday. In fact, this afternoon is going to be the latest new issue with some exciting ideas in there and some exciting updates on the companies I cover and recommend. I also invest with my own money or the small fund that I manage.

in probably 70 to 80 percent of the ideas that I cover and recommend. There's not a lot of newsletter writers that put their money where their mouth is. In fact, I just added one of those positions earlier today, as you and I were discussing before we started recording. I also have a sub stack now called Mining Stock Journal is the name of the sub stack.

Craig Hemke (24:40)
That's for sure.

Is that a free sub

stack Dave? that something that or is that part of the subscription?

Dave Kranzler (24:57)
It's, it's,

well, it's got a free version and then a paid version. you know, and I, I post content from my newsletter on there, you know, occasionally the specifics content about a specific stock. and then if you do the, the, the paid subscription to the, to the sub stack, it includes a subscription to the mining stock journal.

Craig Hemke (25:18)
Perfect, perfect. And that substack, know InvestmentResearchDynamics.com, but the substack under that name or your name?

Dave Kranzler (25:24)
Just Google

Mining Stock Journal sub stack.

Craig Hemke (25:29)
Even an old fool like me could find that, think. So no excuse for anybody else to not find it. Dave, thank you. And again, I just tell everybody on my site, you know, I mean, if you don't know how to measure, you know, grams per ton over length and all that kind of stuff, I find people that do and Dave does. So I always want to drive people to at least check your service and see if it's the right thing for them.

Dave Kranzler (25:47)
Thank

Appreciate that, Craig.

Craig Hemke (25:58)
Dave, thank you for your time. It's always so insightful to visit with you and especially at the way this year has begun, with all these different cross currents and dots, it's been fun to pick your brain a little bit. So thank you.

Dave Kranzler (26:11)
Thanks for having me on again, Craig. I will say it's, you know, over the last three or four weeks this year has gotten extremely interesting in the precious metals sector.

Craig Hemke (26:21)
And imagine it cooling off anytime soon either. So you gave me a great segue to remind everybody to like or favorite, either SprottMoney.com or whatever channel you get this content. There's more still coming in February. There'll be more in March and all through the year. So you don't want to miss any of it. Stay on top of things. SprottMoney.com. Thank you, Dave. And thanks everybody for watching. And again, keep an eye on this channel. the month will continue. The headlines will continue to come at us and we'll have more information for you.

Dave Kranzler (26:23)
No.

Craig Hemke (26:50)
as we roll deeper into the month of February. Thanks for watching, everybody.