Eric Sprott: Central Banks Are Keeping a Padlock on Gold Prices

Thursday, 07 Mar 2013 08:15 AM

By John Morgan

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Central banks are manipulating the price of gold to blunt the impact of their wanton economic policies, according to asset manager Eric Sprott.

Sprott, founder of both Sprott Asset Management and Canada’s large bullion holder, Sprott Money, acknowledged it may sound like a conspiracy theory. But he believes government intervention is the only logical reason gold prices are not higher.

“I would hypothesize that the central bankers know their policy of printing money is the most irresponsible thing imaginable, and they are suppressing gold and silver prices to hide their irresponsibility,” he told The Gold Report.

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Sprott said that without such manipulation, inflation would be raging, and the price of oil and agricultural commodities — not to mention gold itself — would be on a skyward trajectory.

The demand for physical gold is far beyond the supply of gold, according to Sprott’s research. He said the annual gold supply has not changed in 12 years, despite increasing demand from China, India, the U.S. Mint, silver and gold coin sales and even non-Western central banks.

“Where is this gold coming from? I think the Western central banks are selling gold to keep the lid on the price so everyone thinks their monetary policies are benign. Nothing could be further from the truth.”

According to Sprott, the world’s monthly production of gold is only 180 tons, and China and India together have recently bought it all.

“So where did the gold bought by the rest of the world come from? From the Western central banks, as far as I’m concerned.”

In the gold and silver funds he manages, Sprott said one-third is allocated to physical bullion assets, one-third to gold equities and one-third to silver equities.

Since 2004, China’s foreign currency reserves have ballooned more than 700 percent and are now enough to buy every central bank’s official gold supply — twice, GoldCore reported.

Bloomberg chart data shows China’s foreign reserves surpassed the value of all official bullion holdings in January 2004 and rose to $3.3 trillion at the end of 2012, GoldCore said.

The price of gold has not kept up with the rise in the value of Chinese and global foreign exchange holdings. Gold has increased just 263 percent since 2004, while the registered volume little changed, according to data based on International Monetary Fund and World Gold Council figures.

GoldCore predicted the People’s Bank of China, as well as other central banks, would continue diversification into gold from their huge foreign exchange reserves.

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