On the heels of a $25 surge in the price of gold and a nearly 5 percent rally in the price of silver, today King World News takes a look at what would lead one of the world’s richest men, billionaire Frank Giustra, to make a massive bet on significantly higher gold and silver prices in the future.
Egon von Greyerz: “Eric, we are seeing a very nice move in gold and silver today. I have consistently said that the big move we are going to see for the next few years would start before 2015. The start of this move beginning in December seems perfect. I’m not surprised at the action at all and the breakout is clear….
Continue reading the Egon von Greyerz interview below…
“This advance will go a lot further on the upside, and this is happening at the same time that the stock markets are coming off a little bit and more importantly the dollar turning down. That’s very significant because I’ve always said that a move up in gold will be linked to a move down in the dollar.
It certainly looks as though the dollar is turning down here and this should be the beginning of a very big move to the downside for the dollar. So this is going to be the start of an exciting period for the precious metals that KWN readers around the world will enjoy for the next few years.
Eric, last week I was speaking at the Mines & Money Conference in London last week. It was interesting because I met with one of the wealthy family offices who had tens of millions of dollars of gold with one of the major Swiss banks. I asked him if he understood the risk and he said, ‘Well, there’s no risk because the gold is segregated.’
I then told him about the many experiences we have had with Swiss banks where the gold we tried to transfer from Swiss banks was not there. Clients received new bars because the gold they deposited that was supposed to be segregated was no longer in the vaults where it was supposed to be safely stored.
But there are other problems associated with being in the banking system that involve major risks. To leave large assets with a bank today, whether it’s gold, silver, or securities, involves massive counterparty risks. Take the largest two Swiss banks for example — UBS and Credit Suisse — they have a combined balance sheet of about 3 trillion Swiss francs. Well, that’s 5-times Swiss GDP. That means these two banks are too big for the country.
If you combine all the Swiss banks’ balance sheets it totals 7-times Swiss GDP. That’s on the same level as Cyprus and we all remember what happened with the Cyprus disaster that led to the bail-ins. We have discussed it many times, Eric, the fact that more bail-ins will come in the West. This will happen in many countries because when they have a banking system that is so big, bail-ins are the only way to solve the problem because the governments can’t solve it when you are talking about 7-times GDP.
But the balance sheets of the banks is nothing compared to the derivatives exposure they have. If you take UBS and Credit Suisse, they have a total of 83 trillion Swiss francs in derivatives. That is a staggering 135-times the entire annual GDP of Switzerland. That is insane. This is why it is so incredibly risky to be in the banking system.
But it’s not only the Swiss who are in this position. If you look at the 4 largest U.S. banks, they have a combined derivatives position of about $230 trillion. This is about 14-times U.S. GDP. And when I say $230 trillion, you have to remember that is valuing total outstanding worldwide derivatives at about $600 trillion. That is the revised figure the BIS (Bank for International Settlements) released 2 or 3 years ago. But I believe the total derivatives exposure is $1.2 quadrillion. That means the U.S. bank exposure is probably twice the $230 trillion figure.
And the risk today that counterparties will default on their derivatives is enormous. This is a world with debt of $270 trillion and $1.2 quadrillion of derivatives. So the risk of another Lehman catastrophe that leads to a worldwide domino effect is massive. And this could implode the entire global financial system.
In the midst of this massive bank leverage there are powerful deflationary forces that are building. This is putting pressures on the global economy and the banking system. So we can’t be too far from a massive money printing program. Central banks know that a deflationary implosion would mean the end of the banking system. All of this will be incredibly bullish for gold and silver going forward as well as the shares.”
Greyerz added: “At the Mines & Money Conference I had a fireside chat with Frank Giustra, who is a billionaire in the mining sector and a master of timing. He is absolutely convinced that this is the time to buy the mining shares of well-financed and well-managed companies. He has now invested a major amount of his capital in that sector and I agree with that.
Gold and silver look extremely good now both technically and fundamentally. And when you look at how quickly the entire global financial system can implode because of the immense derivatives nightmare, I understand Giustra’s massive bet on gold and silver prices going significantly higher. I also believe, like Giustra, that high quality mining companies can go up 10-times in price or even more in the years to come.”
IMPORTANT – KWN has many more interviews being released today.
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The audio interviews with Stephen Leeb, Andrew Maguire, John Embry, Gerald Celente, Rick Rule, Bill Fleckenstein, Ben Davies, Greyerz-Turk-Stamm, David Stockman, William Kaye, Eric Sprott, Rick Santelli, John Mauldin and Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf — to listen CLICK HERE.