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Paul Brodsky continues:
“So, in a world where we have collapsing sovereign debt, that is denominated in baseless currencies, suddenly gold takes its global sovereignty without regard for any other policymaker because that’s what the marketplace is starting to recognize.
The issue that gold, being priced in currency terms, has not appreciated as many current gold holders think it should have already, is understandable. I think we are going through a period of transition and we have to put up with fits and starts and two steps forward and one step back as we go through this transitional period.
So, I think it’s very important to keep the daily change in futures prices on exchanges, i.e. paper currency, in perspective. If you are holding physical gold, it’s time to accumulate based on weakness in paper gold. I think there’s a very distinct trade to be done here.
When asked where the physical gold is coming from to meet the demand, Brodsky responded, “I honestly don’t know where the physical gold is coming from. I’m not so sure that futures prices, on a daily basis, reflect the flow of physical gold. It’s more likely they reflect the day to day sentiment of paper gold holders, and as you and others have discussed, we’re not quite sure whether all of the gold can be settled or certainly all of the silver for that matter.
When we look at the actual numbers they are actually pretty telling. Only about half of one percent of long positions in exchange traded gold futures contracts actually take physical delivery. Exchange inventories, available for delivery, are less than 5% of outstanding contracts.
So, let’s just say that 7% or 8% or 9% of all futures contract holders wanted delivery of their bullion, we would see a situation where the exchange couldn’t come up with the gold. Also, if they put out margin calls to those that were short, then there would be a scramble and suddenly you would see the bullion price rise for physical delivery.”
When asked about his outlook for the gold price in 2012, Brodsky stated, “My partner Lee Quaintance and I are bullish on the price of gold and silver in currency terms. We think precious metals are going to appreciate as central banks in Europe, and the Fed as well, are going to be forced to print more money and dilute their currencies. There’s just no way around it, we have to deleverage the global financial system.
As far as price goes, certainly over $2,000 (for gold). It’s not out of the question that it could get to $10,000 if there’s a formal devaluation.”
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
Eric King
Paul Brodsky - Gold Could See Five Digits in 2012
On the heels of legendary trader Jim Sinclair’s interview regarding the current panic in the gold market, today KWN wanted to speak with the firm that is calling for $10,000 gold to get their take what readers should be focused on at this point. Paul Brodsky, who co-founded QB Asset Management Company, had this to say to KWN readers globally, “I think it’s important to keep gold in perspective when we look at gold and how much central banks own vs what is out there in the private sector. It totals less than 20%. Yet, clearly, treasury ministries around the world and central banks that control the flow in the stock of global currencies continue to hold gold and are becoming net purchasers of gold.”
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
December 23, 2011
