Central Banks Keeping Padlock on Gold Prices: Sprott
Posted by Adam King on March 07, 2013
Billionaire asset manager Eric Sprott has recently said central banks are manipulating the price of gold in order to blunt the impact of their wanton economic policies.
Sprott is the founder of Sprott Asset Management and Canada’s largest bullion holder, Sprott Money. He acknowledged his statement regarding the manipulation of the gold price may sound like a conspiracy theory but he believes government intervention is the only logical reason gold prices are not higher.
Sprott said he would hypothesize that the central banks know their policy of printing money is the most irresponsible thing imaginable and they are suppressing gold and silver prices to hide their irresponsibility.
On Thursday, the spot price of gold dropped $5.57 or 0.35 percent to $1,578.40 per troy ounce. U.S. gold futures for April delivery gained $3.60 or 0.23 percent to $1,578.60 per troy ounce.
Despite the prices exhibited in markets, other dynamics are taking shape. Sprott’s research indicates to him to the demand for physical gold is far beyond the supply of gold. He added that the annual gold supply has not changed in twelve years despite increasing demand from China, India, the U.S. Mint, silver and gold coin sales and even non-Western central banks.
Sprott asked where the gold is coming from, saying he thinks Western central banks are selling gold to keep the lid on the price so everyone thinks their monetary policies are benign. Nothing could be further from the truth, Sprott added.
The world’s monthly production of gold is only 180 tons, and China and India together have recently bought it all, according to Sprott. Sprott asks where the gold bought by the rest of the world come from and concludes it came from the Western central banks.
Bloomberg data indicates China’s foreign reserves surpassed the value of all official bullion holdings in January 2004 and rose to $3.3 trillion at the end of 2012. The price of gold, however, has not kept up with the rise in the value of Chinese and global foreign exchange holdings. The price of gold has increased 263 percent since 2004 with registered volume little changed, according to data based on International Monetary Fund and World Gold Council figures.