Williams:  “There are some really fascinating things going on in the gold market.  We had some very interesting numbers come out of the U.K. this week.  U.K. export to Switzerland are up 10-fold.  There has been nearly a staggering 800 tons of gold that have been shipped from the U.K to Switzerland. 

What’s going on there is the Swiss refineries are melting down these 400 ounce bars and producing small coins and bars to ship out to Asia, where the premiums are higher.  But we are talking here about a significant amount of gold that is flowing into Asia.  The Hong Kong import numbers are off the charts.  The gold flowing from the U.K. into Switzerland is off the charts.  All of this gold is heading into Asia to meet the massive demand for physical metal.

There are queues outside of jewelry stores here in Asia because of people who are looking to buy gold....

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“I keep trying to get this point across to people, particularly in the West, they have to understand what gold means to people out here in Asia.  It really represents wealth to them, and when they buy gold they don’t sell it.

Right now there is a lot of fear out here, particularly in India.  There are some terrible capital controls that have been put in place in India, in an attempt to restrict this flow of gold.  There is now discussion that the Indian Reserve Bank may be looking to lease out their 200 tons of gold because they think they can make $23 billion in interest payments on that. 

But that is a very, very dangerous thing to do given the tightness in the physical supply right now.  If India does lease that gold out and it’s not just a book entry, which I would assume they would definitely want it to be, but if they physically lease that gold out and it leaves their vault, I don’t think India will ever get that gold back, Eric.

It really feels to me like the tightness in the physical market is so acute that if you hold physical gold, you do not want to lend it to anybody else right now, for any price at all.  An entity would have to have a really good reason to do that.  Generally when central banks do something this extreme it’s because they want to move a currency down, or they want to move the price down, but it’s a very, very dangerous game to play right now.”

Eric King:  “Grant, there is enormous pressures on India from Western central planners to stop the flow of gold into that country -- to stop the Indian people from buying gold.  There has also been this relentless attack on the rupee.  I am wondering if there is something bigger going on here in terms of this pressure from the West, because all of the sudden we now have this information coming out that India might lease this 200 tons of gold?”

Williams:  “As I said before, if you look at what gold means to Indians, I mean it’s been wealth and it’s been money for centuries.  And so you can put all of the capital controls you want in place, but gold is going to come in to India.  It’s going to come in through fair means or foul.  And the smuggling numbers are through the roof.  Indian authorities have already seized 10 times the normal amount of gold since the capital controls were put in place.

People estimate that roughly 95% of gold smuggling in India goes undetected.  So these are staggering numbers.  And this gold is going to find its way into the country no matter what because people don’t trust the currency.  They want to rely on something that they know is money, and that will hold its value no matter what the government does -- that to Indians means gold, pure and simple.

So you can put quotas, you can ban the import of coins, you can do all of the measures that they have taken in India, but that gold is coming across the border one way or another.  It’s a very, very important part of Indian culture.

I don’t think the West is going to get much traction in trying to force the Indian Reserve Bank to sell gold.  It’s just not going to happen.  Perhaps the compromise is that they lease this gold into the market.  The West would feel like they are killing two birds with one stone -- the Indians raise some dollars to support the rupee, and the extra supply of physical gold into the market suppresses the price a little.

But you have to remember, that 200 tons that India bought from the IMF back in 2009, and the threat of that 200 tons being available in 2009 really dented the gold market for a considerable period of time.  The market was under a lot of pressure because people were worried that this 200 tons of gold was going to hit the market.

India came in and took it up in one fell swoop.  I believe at that time that billionaire Eric Sprott had bid the IMF for some of their gold and was told, ‘They would only sell it to another central bank.’  This, to me, raises a whole bunch of other questions, but the fact that this gold was taken out so aggressively by India really calmed the market down.

Now, here we are today with talk that they are possibly going to lease this gold into the market, but what’s interesting is the gold price hasn’t really reacted.  That tells me that this concern over the supply of gold coming in to the market and suppressing the price is really not having an impact because the shortage of gold is a far more prescient issue right now.

It really feels to me like this whole game, if it’s not approaching an end, appears to have certainly created a shift that is happening around us right now.  As I mentioned to you last time, we were only going to get a look at the structural changes in the gold market when the gold price started going up, and this is what we are just now beginning to see.  We have now seen gold behave very, very positively, and in a manner that it wouldn’t have done just a couple of months ago when it was trending lower.

So it definitely feels like we have seen a bottom.  Now, if people genuinely expect prices to be higher going forward, there is going to be a real scramble to get hold of physical gold in order to meet delivery requirements.  The harsh reality for the gold bears is that this squeeze will take place at a time when there is very little gold ‘loose in the system’ right now, which means things could get very disorderly on the upside at some point.”

IMPORTANT - This extraordinary KWN audio interview with Michael Pento where he discusses what is about to create panic, crush the Fed, and send gold soaring is available now and you can hear to it by CLICKING HERE. 

© 2013 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.

The audio interviews with Michael Pento, James Dines, William Kaye, Grant Williams, Dr. Paul Craig Roberts, Gerald Celente, Hugo Salinas Price, Chris Powell, David Stockman, Art Cashin and Marc Faber are available now. Also, other outstanding recent KWN interviews include Jim Grant and Felix Zulauf to listen CLICKING HERE.

Eric King

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