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Greenspan: Inflation, interest rates, gold will rise within 5 years
By Mike Fuljenz
Gary Alexander interviewed former Federal Reserve Chairman Alan Greenspan at the recent New Orleans Investment Conference followed by a panel with Greenspan and others. In his closing question during the first one-on-one interview, Gary asked Mr. Greenspan where the price of gold would be a year from now.
Greenspan’s answer, which was somewhat evasive, was, “I can’t say about one year, but five years from now it will be higher.” When probed about a specific number, he said he was skilled in making obscure predictions so he said gold would be “measurably” higher. However, when asked where interest rates will be five years from now, his adjective was stronger. He said interest rates will be “considerably higher.” That’s particularly important since he also believes that inflation is now like a pile of “kindling” awaiting a match.
Turning to inflation, Gary quoted from his 2007 book “Age of Turbulence,” in which Greenspan predicted that if the Fed wanted to keep inflation under 2 percent it “would have to temporarily drive up interest rates into the double-digit range.” That didn’t happen. After the crisis of 2008, the Fed kept short-term rates super-low (zero to 0.25 percent) and CPI inflation has remained low, too.
Greenspan answered by saying that the $3.3 trillion in “quantitative easing” since 2008 has not been in circulation. The banks are holding onto the bulk of these dollars, earning 0.25 percent. Since banks think business loans are too risky, they’re holding tightly to this cash. But then Greenspan said, “We have this huge potential of an inflationary explosion kindling, but it has not been lit. … Ultimately, inflation will eventually rise. It has to rise, and I say that in my most recent book.”
Giant gold nugget found in California finds secret buyer
One of the largest gold nuggets in modern times pulled from Northern California’s Gold Country has sold to a secret buyer.
The new owner of the so-called Butte Nugget and its exact price will both remain mysteries at the buyer’s request, the San Francisco Chronicle reported Saturday.
But Don Kagin, the Tiburon-based coin dealer who brokered the deal, said that a “prominent Bay Area collector” paid about $400,000 for the nugget weighing 6.07 pounds. That wasn’t far off from the asking price, he said.
“Let’s just say it’s a win-win for everybody, Kagin said, adding that the nugget went up for sale Thursday with the deal finalized on Friday.
Gold and silver dive, yet Chinese demand keeps rising
Gold and silver prices have been on a sharp downward path since the U.S. Federal Reserve went ahead and announced the end of QE (“quantitative easing”) – helped by some big sales on the futures (paper gold) markets. “Kick the gold bugs while they are down” seems to be the mantra of the day. Given the end to U.S. QE had been telegraphed months in advance, the latest precious metals price move could have been seen as somewhat surprising – but the big money knows when to strike to its maximum advantage. Gold has been driven back to the $1,170 an ounce level and silver below $16 – the lowest since early 2010. Both were showing a small pick-up at the time of this writing.
But there are some factors that suggest the latest gold and silver price takedown may have been overdone. While QE in the U.S. may be ending, that in Europe may be taking off again. Even in the U.S. the Fed seems wary about allowing interest rates to increase and in Europe they are at rock bottom. But the big anomaly in the gold and silver price decline is again Asian demand. Contrary to many reports, Chinese demand, as reported by the Shanghai Gold Exchange (SGE), appears to be taking off again in a big way.
Nick Laird of Sharelynx reports that the latest weekly withdrawals figure from the SGE hit 59.7 tonnes, which makes total Chinese gold demand – so far this year – over 1,600 tonnes. And if the big weekly withdrawal figures continue for the rest of the year, Chinese demand is again on the way to the 2,000 tonne mark. Gold price and demand just doesn’t gel – but then it should be remembered that in 2013 Chinese demand was enormous, yet the gold price fell consistently throughout the year.
So we have a huge anomaly developing again between gold supply and demand, together having some analysts wonder where on earth all this supply is coming from. The logical answer is perhaps leased gold from central banks, but as most of this appears to be disappearing into firm hands in the East which will not readily come back on the market, the big question is how can this leased gold ever be returned? The short answer is that it cannot.
From Bloomberg News:
Russia buys most gold for reserves since financial crisis of 1998
By Nicholas Larkin
LONDON – Russia boosted gold reserves by the most since defaulting on local debt in 1998, driving its bullion holdings to the largest in at least two decades.
The country expanded its stockpile, the world’s fifth-biggest, by 37.2 metric tons in September to 1,149.8 tons, according to data on the International Monetary Fund’s website. The increase, valued at about $1.5 billion, was the biggest since November 1998. Russian reserves, which overtook those of Switzerland and China this year, almost tripled since the end of 2005 and are at the highest since at least 1993, the data show.
Australian scholar says futures markets suppress commodity prices, keep producing nations poor
Thirteen years ago the British economist Peter Warburton wrote that Western central banks were using the futures and derivatives markets and intermediary investment banks to control commodity prices, giving rise to the adage: “The futures markets aren’t manipulated. The futures markets are the manipulation.”
MineWeb’s Lawrence Williams interviewed a mathematician and former stockbroker who holds a doctorate in math from the University of Melbourne, Australia, Fraser Murrell, and who emphatically concurs, describing the futures markets as the mechanism by which the financially sophisticated West loots the developing world, which is dependent for its livelihood on the production of natural resources. The Western countries sustaining these futures markets, Murrell argues, thereby perpetuate poverty in the developing countries.
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