Peter Cardillo Sees $1,500 Gold Next Year

In an inteview with Hard Asset Investor's Mike Norman, Cardillo says the deflation talk is not going to be borne out; instead, the U.S. is going to be visited by inflation.

Cardillo: I don’t think it’s going to lead to deflation. And, for the moment certainly, we don’t have an inflation problem, that’s for sure. But we will have an inflation problem. And we could have hyperinflation if we don’t get these budget deficits under control. And I suspect that we still have wiggle room here in the States. And of course, the austerity programs that have been enacted in Europe probably mean that inflation is going to be dead for a while.

Norman: But why are you so concerned about the budget deficit? We saw the deficit during World War II run up to 35 percent of GDP. That would be the equivalent of something like a $5 trillion deficit today. We saw the national debt, the public debt, run up to 120 percent of GDP. Now we’re about 90 percent. We’re really about 65 percent, if you just consider the debt owed to the public. What is the big concern when … and you said even hyperinflation … historically, and in context, the debt really isn't that high?

Cardillo: That’s right. That’s why I said we have wiggle room. Right now, we don’t have a high debt. The question is, do we continue to spend? And when I said “hyperinflation,” I’m not talking about hyperinflation appearing over the next six months or a year or possibly even two years. I’m talking about down the road if we don’t correct these budget deficits, these imbalances, and not only here in the States, but on a global scale. Because one of the problems that we have is that we have a debt global burden that’s continuing to hurt the markets.

And if you look at the price of gold, that’s telling you something. Right now, gold is out of favor. And I think the reason for that is because it has …

Norman: Well, I wouldn’t say it’s out of favor. It came down a little bit, but got up to, like, $1,250. It’s $1,150-1,160, something like that.

Cardillo: Right. When I say “out of favor,” I mean it’s lost a bit of its luster, in the sense that we’re not seeing headlines anymore, “Gold made a new record high.” No, that’s not happening. And I think the reason for that is simply because of the fact that, from a fundamental viewpoint, there’s been a slowdown in purchasing gold products from India, which is generally, traditionally speaking, a seasonal pattern in this time of the year. And, of course, we didn’t see China come in and buy any more gold from the IMF. And of course, the IMF is selling gold....

Perhaps surprisingly, the interview isn't full of softball questions. At the end, Cardillo gives his $1,500 target and then says he thinks gold will peak at that level. He doesn't explain why.

John Embry Says Gold On Verge Of Parabolic Rise

In a wide-ranging interview with Mineweb, Embry said that gold has some way to go and could hit $1,500-$2,000 in the next 18 months.

GEOFF CANDY: In your latest letter you talk about gold being on the cusp of a parabolic rise - is that for these reasons - where are we now or when are we likely to see that sort of rise coming through?

JOHN EMBRY: Once we get through this very dull summer period where gold is generally kind of soggy - particularly into early August anyway, they're going to start to see manifestations of this move probably by September if not earlier. I would expect the last few months of the year to be quite robust which in a seasonal sense is often the case, but this time I think it's going to be more robust than usual.

GEOFF CANDY: You mentioned earlier the moves by the Chinese, and there was an announcement out today that they're going to look to allow banks to hedge bullion positions in overseas markets and things like that. Also perhaps look at more actively increasing the number of Yuan denominated gold derivative products. What sort of impact is that likely to have?

JOHN EMBRY: Anything the Chinese do in the gold market, based on the fact that they're just holding an excess of US Dollars - they're going to have to be very careful on how they spend it, but they're going to be buying more and more gold as an alternative. They'll be buying other things as well as an alternative to US Dollars, so irrespective of what they say, just look at what they do. The fact is that what they're doing is going to add dramatically to gold demand in the upcoming period and I just don't think the physical supply is there to meet the kind of demand that is being marshalled - the investment demand all over the world and particularly this physical demand that's building in the Far East....

Embry also said that jewelery demand, which is elastic, is being compensated for by investment demand, which is inelastic.

Peter Munk Says Gold Price Will Rise For Years

Although disclaiming the label of "goldbug," Barrick founder Peter Munk says gold will keep rising over the next several years.

[E]conomic uncertainty and investor warniness about other asset classes -- particularly currencies -- would continue to support gold, which hit record highs in June.

"I expect the trend to continue because I think once people have lost confidence in their currency, once people have lost big money in equities and in bonds and traditional vehicles, their confidence in gold, especially having seen gold rise year in and year out for a decade, is reinforced," he told Reuters....

"A temporary setback is normal in all trading situations and is not going to change that," Munk said, but added later: "I am categorically not a gold bug."

He also said Barrick's strategy will be to grow margins and the dividend along with it as gold keeps going up.

Nassim Nicholas Taleb Says Government Debt Next Black Swan

In an interview with Business Week timed with a release of a new edition of his book, Taleb says government deficits and debt are going to be the source of the next Black Swan.

What are are potential sources of fragility or danger that you're keeping an eye on?

The massive one is government deficits. As an analogy: You often have planes landing two hours late. In some cases, when you have volcanos, you can land two or three weeks late. How often have you landed two hours early? Never. It's the same with deficits. The errors tend to go one way rather than the other. When I wrote The Black Swan, I realized there was a huge bias in the way people estimate deficits and make forecasts. Typically things costs more, which is chronic. Governments that try to shoot for a surplus hardly ever reach it.

The problem is getting runaway. It's becoming a pure Ponzi scheme. It's very nonlinear: You need more and more debt just to stay where you are. And what broke [convicted financier Bernard] Madoff is going to break governments. They need to find new suckers all the time. And unfortunately the world has run out of suckers.

He says that a U.S. sovereign debt crisis will be a Black Swan to those not forewarned. So, his own warning could be seen as an attempt to forestall it. He also said the world has become too financialized, with too little attention paid to ordinary sources of income. A sound financial plan for (say) retirement should be focused on capital preservation.

Peter Krauth Sees Higher Gold Ahead, In Par Due To Banks

In a wide-ranging interview with William Patalon III, Peter Krauth gives several reasons why gold is going to $5,000/oz in the longer term and is also veering in on a shorter-term leap. One of the reasons he brings up isn't mentioned by many: U.S. banks are moving into commodities in a big way.

Q): You've talked about your proprietary "Gold Spike Indicator" (GSI) market-timing signal? Can you give us a basic explanation of what that is and how it works and explain the "window of opportunity" that it identifies?

Krauth: Well, since the financial crisis, some of the largest U.S. investment banks have converted into bank holding companies. That means they must file quarterly reports on their holdings, including gold and other commodities. What I've repeatedly noticed is that, for a certain amount of time before, during and after these quarterly reporting dates, gold has moved up significantly.

(Q): So exactly what is your "Gold Spike Indicator" saying right now ... or what do you expect it to say? How long will this window be open this time around?

Krauth: This window is usually open for about three to four weeks. That's not a long time. It's important to ensure you're properly positioned in time to benefit. This time around, I'm expecting the GSI to indicate that the next two to four weeks are likely the best time to get positioned in both gold and silver, as both those metals could begin to spike soon after that.

As you know, the fall tends to be the strongest period of the year for precious metals prices. What's interesting this time around - because GSI provides a signal four times a year - is that precious metals go through their weakest period in the summer months of June, July and August. That means we could be setting up for an even bigger spike this time around. And that's really exciting.

(Q): You've written extensively about the bullish, long-term prospects for commodities. As part of that, you've uncovered a promising new development in the resources area: It involves banks - especially big investment banks - taking physical control of commodities. Just what is it that we're seeing here? And isn't this an element of your "Gold Spike Indicator?"

Krauth: That's correct - this is part of the GSI. Keep in mind that a large chunk of profits that big banks report these days come from trading. But much of that trading isn't even that risky, it's just leveraged so highly it pays off very, very well. As we know, banks can borrow pretty cheaply these days with interest rates at microscopic levels. But it goes deeper than that. These banks have made strategic moves to "control" many of the commodities they trade.

What I mean by this is that they are no longer just "paper trading" commodities through futures contracts. This began a couple of years ago with the creation of exchange-traded funds (ETFs) that were physically backed with such commodities as gold, copper or silver, to name just a few.

JPMorgan Chase & Co. (NYSE: JPM) and Goldman Sachs Group Inc. (NYSE: GS) have begun taking physical delivery of gold when their futures contracts mature. Last August, Morgan Stanley got the okay to trade with Dubai Gold Securities, which will allow it to take physical possession of the gold.

Earlier this year, Goldman and JPMorgan each bought established metals-warehousing facilities. Goldman purchased Metro International of Detroit for $550 million, and JPMorgan bought Henry Bath of the United Kingdom as part of a larger $1.7 billion acquisition. According to industry insiders both deals were done at a premium. These guys aren't paying premiums unless they foresee higher prices.

As for profiting from a future rise, Krauth likes gold stocks - particularly, mid-tier producers and exploration stocks with multi-million ounce deposits.

Jeffrey Christian On Gold During Deflation

In an interview with Hard Assets Investor, rewebbed by Bullion Vault, Jeffrey Christian explains that gold tends to do well in a deflation because of a ramp-up in investment demand. He points out that gold did go up in deflations past, not just the one that ended with the Roosevelt devaluation.

Jeffrey Christian: Well, it's hard to say that it's true, because we've had very few real deflations in history, in recent history. The big deflation that we had coincided with the Great Depression. And gold came into the Depression on a fixed price. And there was so much investor demand for gold that the governments had to abandon the Gold Standards that existed in the late Twenties, early Thirties, and allow gold to float, at which point Gold Prices basically appreciated 60%.

A lot of people think that Roosevelt raised the price 60%, but he didn't. What he did is he kept raising the price until he found a market clearing price. So, he was really letting the market set the price for gold. And he had to keep raising the price until it got up to $33 before people would say, "OK, now I'll give you my gold."...

And then if you take that deflation out, and you go back and you say, "What about other deflations?" we saw three bouts of deflation in the 1870s, 1880s and 1890s. And in each case, you saw a tremendous Gold Investment demand. So, it's not that gold makes particular sense during an inflation, but what you see in deflation is so destructive of economic sensibilities and systems that people flock to gold as a safe haven. They say, you know, "This could bring down the whole house of cards."

Christian makes the point that gold is much higher than it would be if conventional commodity supply-and-demand fundamentals prevailed, but they don't because of investment demand. Should that source of demand fade away, gold would come down a lot. He doesn't expect it to do so in the foreseeable future.

Harry Schultz Still Bullish On Gold

Harry Schultz is one of the original goldbugs, and a big name even back in the 1960s. [The late Paul Erdman was a "Harry L. Schultz man", or "HLSM."] In an interview with the Daily Bell, exerpted at LewRockwell.com, he said gold is destined to go much higher. One reasons is his belief that the gold markets are manipulated - he believes all market are - but the metal will break the bounds placed on it.

Interestingly, he's an Internet and computer skeptic. He says high tech has traded performance for dependability: it was generally expected that a typewriter would never "hang," but computers don't have that reliability. He also thinks the Internet may be a gigantic trap as the government can collect much more information on people than would otherwise be the case.


I should add that Schultz got his start in old media: newspapers.

Terry Coxon On Inflation

It's a long interview, but well worth going through. Terry Coxon is a legend, in part because he's level-headed about inflation. Right now, he doesn't see any on the horizon because the deflationary tendencies of collapsing credit are balancing off the huge increase in the monetary base. He gives the figure of a 20% increase in the money supply since the financial crisis began, and concludes the Fed has decided that 20% is enough. He makes the point that the huge deficits are not inflationary, but potentially inflationary. His forecast for higher inflation hinges upon a double-dip (or a serious slowdown) that prompts the Fed to ramp up the money supply again. Once recovery kicks in, and lending ramps up again, inflation will take off.

Guide To NYMEX Mini Futures

In an interview with Lara Crigger of Hard Assets Investor, Jennifer Ropiak explains mini-futures contracts and how they work. The gold mini-futures contract is for 33 ounces, and the silver one is for 1,000 ounces. As the prices of both metals continue to rise, both minis are becoming more popular.


One interesting point: physical delivery is not allowed for a single mini contract; instead, a Warehouse Depository Receipt (WDR) is issued. Once three gold WDRs are accumulated, or five silver WDRs, the holder can exchange them for a regular-sized contract delivery of physical metal. These contracts don't have to be settled in cash.

A Case For Gold Stocks

In an interview with the U.K.-based Jutia Group, founder and CEO of CD Private Equity Natural Resources Fund Carmel Daniele predicts that gold will go to $2,000 within twelve months. No doomsayer, she's pinning her forecast on the commodity super-cycle which she expects to continue for 20 years all told. That cycle, she expects to be concurrent with continued high growth in the PRC. She also points out that urbanization and high-growth waves typically last about 30 years, citing America and Japan as examples. Mainland China's, she claims, has only been rolling for ten years.

Unlike many other gold bulls, her interest is in juniors. Most of the names she discusses will be familiar to veteran gold-stock watchers: they're juniors with huge deposits, like International Tower Hill and Ventana.

Investec Sees Gold Above $1,200

It's be cold comfort now, but Investec's co-portfolio manager Daniel Sacks sees gold going above $1,200. The main reason he gives is the metal's performance over the latest leg of the Eurocrisis: its postive corrlation with the U.S. dollar as late.


The interview seems to have taken place yesterday, but it's still informative.