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 e-mail, 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 e-mail 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 (three to four times normal) for the past two years or so."
Suddenly, "About eight 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!
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
Republished with permission from
The Daily Reckoning. Copyright 2010, The Daily Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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