Expect Squeeze In Gold, Price Headed Multiples Higher

Today John Embry told King World News, “I have been a long time proponent of the idea that we may very well be at peak gold production in the world.” He warned, “We may have seen the peak.” Embry also stated that he believes we are headed towards a, “…classic supply/demand squeeze.” This will send gold, “…to multiples of the current price.”

Embry, who is Chief Investment Strategist of the $10 billion strong Sprott Asset Management, discussed both gold and silver, but first, here is what Embry had to say about the ongoing crisis in Europe: “Over the weekend they accepted more collateral at the Greek Central Bank so they could make their payment to the ECB. So I think they will do what they have to, to keep this thing moving forward.”

John Embry continues:

“But the thing that’s the big problem, and question is, are the funders, Germany, Finland, the Netherlands, etc., do they have the balance sheets and the economic strength to bailout these peripherals in the South that are in horrific condition?

And even if they do, do they have the appetite to do it? All I can tell you is that it’s an enormously serious problem.

It will lead to one of two things, massive QE in Europe, or a splintering of the euro. Either one of those things is going to be extraordinarily bullish for the precious metals.”

Embry had this to say regarding gold: “I have been a long time proponent of the idea that we may very well be at peak gold production in the world. We may have seen the peak. The problem is that all of the low hanging fruit has long since been plucked. The high grade ore bodies in geopolitically (friendly) places have (already) been mined and a lot of these open pits have been mined. And they (open pits) have a very finite life.  Underground mines last forever (by comparison).

But the fact is all of the easy stuff has been mined and where you are now finding anything of significance, it tends to be in geopolitically unattractive areas. They are hard to mine and they are going to be extraordinarily expensive to mine. As you saw with the Barrick announcement, the cost escalations on that development on the Argentine/Chilean border, which is at enormous altitude, have just gone through the roof.

That’s indicative of how it’s going to be for a lot of these companies, but it will all be compensated for, in their case, by much higher gold prices. So I don’t worry too much about the fact that the production profile can’t grow that much because ultimately that will be extremely bullish for the gold price.

This is a classic supply/demand squeeze. We know that demand is rising in many parts of the world, particularly in the East. The central banks are buying, the public is buying it, and eventually the West is going to come to their senses and stop sending it over there.

As monetary debasement becomes apparent to more and more people, demand in the West is going to accelerate. If there is no greater amount of gold coming out of the ground, the only thing that can arbitrate where the gold goes is price, and the price will go up a lot. I think the gold price could go up to multiples of the current price.”

Embry also spoke about silver: “I have been of the long held opinion that if we get into a raging bull market, which we are going to in the two precious metals, that silver will head towards the low end of the gold/silver ratio, which is currently over 50. In real bull markets, it will fall as low as 10 or 15 (to 1).

If that happens, silver will move up three times as fast as gold by the time this is all over. And I think gold is going a long ways, so you can get really excited about the upside potential in silver.”

Original Source: King World News