04/21/10 Tampa, Florida – John Embry of Sprott Asset Management is one of the really “tuned in” people of the world, in that he knows so much that he actually knows who I am! I know this because when I called him on the phone and said, “Hey! John! What’s the poop about gold and can you loan me a few bucks?” I think he said, “It’s that Mogambo idiot” right before the line went dead. I’ve arrived!
Anyway, this is not about how I am walking around on Cloud 9 because someone as famous as John Embry knows who I am, but about how he is also “tuned in” to the world of gold, gold mining, gold refining, gold selling, gold buying, and, I assume, all things gold, probably including the gold fillings in your teeth, although I don’t know this for sure since I never got a chance to ask him before he, you know, hung up.
And with that kind of perspective, it is important when he says, “As inflation rears its ugly head and future demand for gold promises to overwhelm mine supply, gold’s price will launch a parabolic rise from current levels in the near future. Gold has much, much further to go”, meaning that gold will soar to heights undreamt and, when it does – even better! – people will say, “Hey! That idiot Mogambo was right! He’s apparently not as stupid as he looks or sounds!”
So, not only am I happy about the coming cessation of Anti-Mogambo Hostilities (AMH), but I am also glad that he brought up the subject of the diminishing supply of gold, as it turns out that all the easy gold has been found and mined, and all that is left is in hard-to-get-at and as-yet-undiscovered deposits, assuming that the miners can get the permits and can successfully fend off the inevitable – an expensive – legal challenges to opening a new mine, which doesn’t even mention the slimy manipulations and short-selling schemes at the futures exchanges that have added immeasurably to the “supply” of gold by supplying all those years and years of gold buyers with, not gold, but mere pieces of paper that say, “You own gold, and we’re holding it for you, and this piece of paper you are holding in your hand proves it!” even though there ain’t (pause) no ( pause) gold backing it up.
The point is not that there is a lot of corrupt crap going on out there, aided and abetted by corrupt government and regulatory agencies, apparently none of whom appreciate being called “Goon squad stooges”, judging by my email, but that there is a massive imbalance between demand (huge) for real gold and supply (small) of real gold, which, according to the immortal supply/demand dynamic, where the price varies to equalize supply and demand, means that the current equilibrating price of gold is Too, Too Low (TTL), and by a Long, Long Shot (LLS).
The reason that I am happy that he brought up the subject of a falling gold supply is that it coincides exactly with an email from Junior Mogambo Ranger (JMR) Len O., who says “I’ve been a jeweler for 30 years and I have been buying scrap jewelry from the public that whole time. We have been buying massive amounts (3-4 times normal) for the past 2 years or so.”
Suddenly, “About 8 weeks ago, it dropped by 60-70% to what I would call typical levels. I have spoken to other jewelers and several wholesalers/refiners, and I have learned that this is true nationwide.”
He explains that this is not too surprising, as “we had all been expecting this…people have only so much they can liquidate and everybody and their sister have been setting up shop to buy” scrap gold.
The upshot? It’s perhaps not coincidental that you used that term, as he goes on “The upshot is that what was until recently a huge supply of raw gold onto the secondary market has dropped significantly. I don’t know how many tons per year that translates to, but it should produce a very noticeable shortfall on the supply side.”
Perhaps you are thinking that this is where I insert some kind of Screeching Mogambo Entreaty (SME) for you to go out and buy gold, silver and oil immediately, as this Peak Gold thing, and the inflationary monetary insanity of the Federal Reserve combined with the fiscal insanity of the federal government’s catastrophic deficit-spending, means that gold will soar, soar, soar in price as the purchasing power of the dollar falls when all those trillions and trillions of dollars enter the money supply.
If that is what you were thinking, you are right!
The Mogambo Guru
for The Daily Reckoning
The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.
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LOL Great article and website. Found posted on coininfo.com
Regards,
Karl
OK. The question is: when gold will will hit 5,000-7,000/oz, what should we gold bugs do? What should be the target price to sell (before the state of affairs return to “normal”)? And above all: price in what? Should we wait for some new global currency and global gov’t starts to sell?
All hail The Mighty Mogambo (TMM)!
Tom, the answer to your question is that gold and silver are a medium of exchange and a store of value. They are money. So as you take an ounce out and sell it, you will have to work out a reasonable equivalent in the things you want and need.
And as long as the system kind of holds together, gold and silver also offer the little guy the opportunity to profit from the inflation which the politically connected otherwise get first and only access to. They’re printing and giving themselves money for free which real folk have to give up parts of their lives for, and your precious metals act as a kind of sponge or magnet to attract some of that hot money which otherwise you’ll never see. So if you obtain some pm now (or in 2001 as I did) you can eventually pay off a reasonable mortgage and fund a new life (OK- a small business with low enough income to legally avoid most of the tax burden but high enough to live on comfortably and more importantly freely).
So the public has already sold off its broken scrap gold jewelry? Very interesting.
We get the advise to buy gold, silver, and oil – Do stocks mining for gold and silver and companines drilling for oil qualify , or do you mean acutally owing the physical commodities?