With all the controversy surrounding the big crash in gold weeks ago, Ronald Stoeferle, author of the authoritative annual report, “In Gold We Trust,” explains to Financial Sense Newshour how we were very close to a run on the bullion banks, not to mention an outright default on the leveraged gold market.
Recently, as investors were either unable to get physical delivery or forced to pay extremely high premiums, he says:
We all know that the paper market is highly fractional reserved. I mean, if you compare it to like 10% of bank customers requesting their money on their savings account, that would be a similar situation; and I once said that the bank run will be the new people’s sport going forward in Europe. But, I think, this very fast growing desire to convert paper claims into physical gold and moving it out of the financial system is a really interesting topic, and it clearly shows that we’re seeing what I would call some sort of counterparty aversion. Within this correction or crash we’ve seen shortages of physical gold not only in Europe and in Asia but all over the world. I’ve been talking to people from Shanghai, from Hong Kong, from Switzerland, from Germany, to bullion dealers in Austria, in the U.S.—for example, the U.S. mint’s coin sales in April soared to the highest in three years…
As to the reason gold crashed, the respected Austrian gold fund manager enumerates several events, some of which he calls "very suspicious", all taking place within a relatively brief timespan. For example, he lists:
- Dutch Bank ABN Amro defaults on its clients and fails to deliver physical gold
- Reports of very large deliveries moving through Shanghai
- Leak out of the Fed minutes to large banks on split over stimulus
- Goldman Sachs says to go short gold
- Citigroup, SocGen, Credit Suisse, and CIBC all turn negative on the metal
- In very thin trading, massive sell orders (amounting to 15% of total mine production) created a cascading effect and triggered stop losses
- Major support line of $1530 was broken
- Numerous magazine and newspaper covers saying that the gold bubble is bursting and that it’s no longer a safe haven, scaring retail investors out
In our previous interview with Martin Armstrong, Martin said that gold could move in the short-term all the way down to $1150; however, taking a more long-term view, Ronald says, “with the things going on at the moment I don’t think there’s ever been a time where it’s more appropriate to be invested in gold.”
Citing the growing loss of confidence by investors in the banking system, Ronald explains further:
The final collapse of trust in the financial system, in politics, and in the banking industry - I think it happened after the whole Cyprus thing came up. Nowadays, in Austria even, there are discussions about the system [failing]… When I’m holding presentations here in Austria or in Germany - two or three years ago, people would ask me, after the presentation, ‘So, what’s your price target for gold? What’s your view on mining equities? How do you regard silver in comparison to gold?’ But, nowadays, people are asking me, ‘Where should I store my gold outside of the banking system?’ They are asking me, ‘Do you think there will be riots on the street? Will there be a civil war or a Third World War?’ They are asking very different things at the moment, and I think that shows how dramatically the perception of people has changed within the last few years.
To listen to this full interview airing next Wednesday or any of our other expert interviews, CLICK HERE to subscribe.
For a list of previous podcasts and guests, CLICK HERE to see our archive.
