With crude oil tumbling over $2 a barrel and the gold and silver rout continuing, today James Turk spoke with King World News about the ongoing smash in gold and silver and what is happening in the physical market for both metals. Below is what Turk had to say in this timely and powerful interview.
Turk: “You and I have spoken many times, Eric, about how the central planners are fighting an all out war against the precious metals. Getting PayPal to close the account of the Swiss Gold Initiative in order to stop donations just goes to show how far they are willing to go….
Continue reading the James Turk interview below…
“PayPal’s bending to the will of central planners is just one example of what everyone who owns physical gold and silver is up against. Nevertheless, this example of central planner intervention provides a strong reason why we must not lose sight of what Congressman Howard Buffett, the father of Warren Buffett, said in a brilliant speech in 1948: “In a free country the monetary unit rests upon a fixed foundation of gold or gold and silver independent of the ruling politicians.”
Regardless of whether we call those opposed to the precious metals as “ruling politicians” or “central planners,” it amounts to the same thing. When the government controls the currency and the institutions that circulate it – like PayPal – the government controls the economy and each and everyone one of us, which is a critically important point to recognize. If the central planners are willing to close this PayPal account, it is clear that they are pulling out all the stops in their war against the precious metals. They will do anything they can to perpetuate the fiat currency they issue.
In the final analysis, however, the central planners cannot change reality. This statement of course flies in the face of the anonymous aide to Bush the 2nd who in 2004 told Ron Suskind of the New York Times: “We're an empire now, and when we act, we create our own reality.” That exceedingly arrogant statement makes for good chutzpah by a central planner bellowing to a reporter about their own self-importance, but the central planners could not stop reality – let alone create the one they wanted – when in 2007 and early 2008 the financial system started unravelling around them.
But that brings up the important point about whether gold is still a safe haven. The fundamental question we have to ask ourselves is whether gold’s 5,000 year history as money will end here? Just looking at it logically, it would be the height of folly to conclude that gold’s history ends here and that we can instead forever rely hereafter on government issued currency. Gold’s history did not end in 2008, and it won’t end here. The checkered history of government issued currency and the crises brought about when credit bubbles pop speak for themselves.
There are countless people in the world who understand that the attributes that made gold money pre-history have not disappeared. They've just been ignored or forgotten. For example, in the charts of crude oil prices in the blog we did last week, we can see that gold still provides two key functions of money. Gold is useful in economic calculation, in other words, for measuring prices. Also, gold preserves purchasing power.
An ounce of gold can still purchase the same amount of crude oil as it did a month ago or as the chart in last week’s blog shows, as it did in 1950. It is the dollar that is changing in today’s world of volatile currencies which fluctuate against each other, with each fluctuation resting upon the word uttered by some central planner. So the dollar is strong at the moment, but not because of some fundamental improvement. Rather, it is because the euro and yen are weak.
Gold doesn’t serve the third function of money too much these days. It doesn’t circulate too often as currency in payment of goods and services. One can do two things with currency, and gold is saved instead of being spent. But gold does “circulate” in the sense that it is being exchanged 24/7 for national currencies.
So to turn to my key point, Eric, the safe haven reason for owning physical gold still makes good sense. And given the level of undervaluation we are seeing now, my strategy of continuing to accumulate physical metal remains the right thing to do.
Lastly, the central planners have achieved the nirvana they have been aiming for, Eric. The piling on in the paper market has pushed gold below the triple-bottom at $1,180. They wanted to shake out more weak hands, hoping to pick up physical metal. It hasn’t worked out that way. The physical markets for gold and silver have tightened. Both are in backwardation, which is even being reported on the LBMA’s own site.
This backwardation is not being reported on Comex futures, which simply means that the paper market in New York and the physical market for gold in the rest of the world are now more disconnected than ever.
Anomalies like this don’t last long, so if you hold paper thinking that your counterparty will be delivering physical metal to you at some future date, don’t wait. My advice is to ask for delivery now in case this deviation between paper-gold and the physical market gets even more extended and your counterparty fails to deliver, just like the promises made by Lehman Brothers failed when they collapsed.”
UPDATE – KWN has many more interviews being released today.
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The audio interviews with Andrew Maguire, Eric Sprott, Rick Santelli, Bill Fleckenstein, Rick Rule, Michael Pento, Dr. Paul Craig Roberts, Andrew Huszar, MEP Nigel Farage, John Mauldin, Egon von Greyerz, Michael Belkin, and Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf — to listen CLICK HERE.