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Rule - Silver Default Possible, Miners Cash Flows are Parabolic

With continued volatility in gold and silver, today King World News interviewed one of the most street smart pros in the resource sector, Rick Rule, Founder of Global Resource Investments, which is now part of the $10 billion strong Sprott Asset Management. When asked what he is watching and where gold and silver are headed Rule responded, “I think it’s funny, the idea that the Greeks ran out of money without meeting any of the terms that would cause them to be compliant for the last bailout and got another subsequent bailout. The idea of that solving anything is sort of laughable to me.”

Rick Rule continues:

“People in the mainstream markets are looking for hope and seize on any evidence that a crisis is postponed for 72 hours as hope. I think the strength that you are seeing in global equity markets and the weakness that you are seeing in precious metals markets is really a consequence of a very, very strange form of mass delusion.

I’m not saying that gold is going to shoot straight to $2,500 or that one of those black swans is going to land on us today or tomorrow, but I think on a global basis we are in economic crisis mode and the political response is to postpone the crisis by printing.

Given that gold is denominated in a fiat currency which competes against other fiat currencies, I think the bias in the gold market is higher, not lower. So I am pretty sanguine about the gold price, current market action not withstanding.”

When asked about the mining shares Rule replied, “The shares, at least for speculators, are relatively more attractive than the metal. The incredible increases in the prices of the metals that we have seen is now justifying higher share prices....

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“Finally, finally, the incredible amounts of capital that the industry has put into gold mining infrastructure and the incredible increase that we have seen in the gold price has led to a situation where in the last twelve months, but more importantly in the twelve months to come, cash flows for gold miners are going parabolic.”

When asked about silver specifically Rule responded, “As usual I would defer to Eric Sprott on that, who is a frequent guest of yours. Eric makes the point that silver is trading low in historical terms to gold in the first instance. Secondly, that the trading volume of silver, relative to the physical supply available to trade, is laughably high.

The probability, in his view, of a hiccup in delivery in the futures markets is very high, which would have truly dramatic consequences. I buy precious metals mostly as a fear buyer. I buy them, at least in the physicals, to protect my portfolio. My friend, Eric, is more of a greed buyer, he buys them to maximize his benefit.

If you are a greed buyer, a speculator, I suppose silver is the place to be. If you are a fear buyer like I am, gold has traditionally been the harbinger of wealth.”

Rick Rule is known in the industry as one of the wealthiest and most level headed individuals in the industry. So when he brings up a potential problem in terms of physical delivery in the silver market it should be taken very seriously.

The KWN audio interview with Rick Rule is available now and you can listen to it by CLICKING HERE.

Eric King

KingWorldNews.com

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