With gold and silver getting consolidating, today John Hathaway spoke with King World News about what is happening in the war on precious metals. Hathaway also spoke about the gold and silver shares and what is taking place in the industry. Hathaway, of Tocqueville Asset Management L.P., is one of the most respected institutional minds in the world today regarding gold, and his fund was awarded a coveted 5-star rating.
Hathaway: “As far as gold goes, it looks to me like we have made an important low. A couple of people I respect have called it, McClellan would be one of them. I don’t know if that means we rocket higher, but it seems to me we have seen the worst….
“McClellan is basically a neutral market observer, and they are seeing very constructive signs from a purely technical point of view. As far as the shares go, they have to take their cue from gold.
I think that gold has to lead higher, and then I think the shares will respond. Most of the commentary I see from the ‘sell-side’ is kind of like closing the barn door after the horses have run out. They are basically doing these very Draconian scenarios with gold not moving above $1,200 — what companies survive, which companies don’t, that kind of thing. So there is very little discussion about which companies would be really well-positioned in a higher gold price environment.
When I look at the economy right now, it’s very weak. I see poor housing starts and retail sales. Corporate guidance has also been very lackluster. I thought the UPS number was very interesting in the sense that they are seeing lower volumes, particularly from the manufacturing sector. So the whole pattern to me reflects a very soft economy.
Today one of the most respected institutional minds in the entire financial world told King World News that we are in the early stages of what will be a massive short squeeze in the gold market. John Hathaway, of Tocqueville Asset Management L.P., is one of the great original thinkers in the business, and his fund was awarded a coveted 5-star rating. Below is what Hathaway had to say about the developing massive short squeeze in gold.
Hathaway: “I think the story of the day is the disconnect between physical gold and paper. I just saw a note this morning about the most current drop in COMEX warehouse inventories. Brinks also reported this week that their inventories were down 55%….
“We also have what’s been happening with the gold lease rates. This is just another indication of how hard physical gold is to come by. Bernanke also basically made a U-turn on QE by essentially saying we are going to be in this easy money mode for a long, long time. He definitely backed away from ending QE in mid-2014.
I think the shorts had been ganging up on gold with the view that there would be some sort of exit, and now it’s nowhere in sight. So now some of the shorts are running for cover. But if I’m at the Fed, I am looking at a huge mess. We also know that Bernanke is on his way out.
I have a to-do list for the next chairman of the Fed. One would be to open a direct connection so the Treasury doesn’t have to issue bonds. The Fed just gives the Treasury money to fund whatever they need to fund. The other thing they may do is force tax-deferred retirement accounts to own 20% in a Treasury security that has an interest rate ceiling of say 2%. That’s how they are going to try to get out of QE, or the alternative is we are going to have incredible inflation.”
Our good friend Ned Naylor-Leyland of Cheviot Asset Management is back with a MUST READ update on gold.
In light of the deep sell-off in the Gold price, I present 3 charts to clarify what has (and hasn’t) happened.
Chart 1 is a chart of Spot Gold, the second an illustration of what makes up the daily ‘Gold’ market, the third shows the enormous flow of physical metal from West to East in the context of Global mine supply.
There is an ongoing clash between the forces of paper supply and physical demand – paper supply has won the latest round, but its objective of satisfying and slaking demand for the real metal has failed entirely.