Eric King:  “John, what were your thoughts when you heard that the CFTC dropped its 5-year investigation into silver manipulation without filing any charges?”

Hathaway:  “This looks like stonewalling of some kind.  But it’s like the State Department investigating Benghazi.  It’s a review by the CFTC that, on the surface, doesn’t have any credibility.  I would expect that an outside inspection of the same data the CFTC had access to would show something very different....

Continue reading the John Hathaway interview below...


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“I’m very frustrated by it, as I was by their refusal to answer my question yesterday regarding trading activity in the gold market.  We asked the CFTC for trading information in the gold market going back one year, and the CFTC said they just won’t release it. ”

Eric King:  “John, what were your thoughts when the CFTC said you have this request for trading activity but we are just not going to give it to you?”

Hathaway:  “I’m not going to give up.  I’m interested in bursts of suspicious trading in the gold market.  Yesterday we had 20,000 contracts in 5 minutes.  I want to put together a data base of that type of suspicious trading.”

King World News note:  My friend Harry Markopolos, who is a national hero for taking down Bernie Madoff’s $65 billion Ponzi scheme, told me that these type of government organizations were some of the most corrupt and dishonest organizations in the world.  As an example, he told King World News “The Federal Reserve is the most corrupt and most blind regulator that we have.  They need to be stripped of their power ... They are to the point of total corruption ... We are worried about foreign terrorists, but instead it’s the domestic ones, the CEO’s of our largest financial institutions that did us in.”  He also said these type of corrupt organizations (such as the CFTC) are of the banks, by the banks, and for the banks.  Thus the corruption, and the frustration for investors.

The interview continues...

Eric King:  “Where does this leave the gold and silver markets?”

Hathaway:  “I think we are still just chopping around and building a huge base.  So far so good.  It doesn’t feel great emotionally, but if you just kind of look at what’s going on here it seems very constructive to me.  I’m just looking at the tape when I say that.

I spent 3 days in Denver at the Denver Gold Show this week, and then 2 days last week at the Precious Metals Summit.  So I have a pretty good sense of what is going on in the industry.  There are a couple of newsworthy items to report:  One is that this industry (gold mining) is very gun-shy about building new mines.

We will see some divestitures and some stretches of capex.  But the bottom line here is that whatever anybody thinks that global mine supply is going to be 2 or 3 years out, you can haircut that by a big number.  I don’t know whether it’s 15% or 20%, but it’s a huge number.  This will further constrain the already tight supply/demand situation.

I also see a cadre of companies where we are very happy about what management teams are doing in terms of execution.  I still see tremendous value creation by the stronger management groups in the industry.  So our thesis about investing in quality mining companies to position our investors for upside in the gold price is actually getting stronger fundamentally at this time.

So there is a core group of companies, although they are not top-tier names, that I strongly feel will deliver tremendous returns when this next leg higher in gold really gets underway in earnest.”

Eric King:  “The big picture for gold going forward, John, what’s going to drive it?”

Hathaway:  “First and foremost, the Fed and monetary policy in general around the world are in disarray.  It amazes me that the markets are not unnerved by this.  What you see by the Fed is tremendous confusion about, ‘How do we get out of this?’

Right now the general stock market is very complacent and saying, ‘Oh, they will figure it out.’  I would say, ‘I don’t think so.’  Just slowing the rate of bond purchases will have a major impact on key markets.  We’ve already seen just the discussion of tapering dramatically impact the bond market.  But to go ‘cold turkey,’ that’s almost impossible to imagine, without causing tremendous damage to the financial markets.  I just don’t think they are going to do it. 

The other major story that we have talked about, Eric, is the growing distrust in the financial markets that disinter-mediate financial markets and gold.  The best example of this is the Comex.  We’ve seen this tremendous drawdown of Comex inventories, particularly for the JP Morgan account, and particularly for ‘registered gold,’ which has to be delivered upon request when contracts expire.

I think we are going to see similar things at the LBMA.  We see this tremendous flow of gold from West to East.  The Chinese are still paying big premiums.  Entities don’t want a  paper representation of gold anymore -- they want physical gold.

I’m sure there is another crisis out there that we don’t know about.  But what we do know is that there is reckless monetary policy.  We also know that there is a scarcity of available physical gold.  So it won’t take much of an excuse to drive the price of gold significantly higher.  We’ve seen it before and we will see it again.”

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