Embry - This War In Gold & Shorts Getting Overrun

In a recent interview, John Embry, Chief Investment Strategist at Sprott Asset Management, said that we are literally witnessing a war between the physical buyers and the paper manipulators. He continues on to say, "If the commercials run into trouble, King World News readers will see a move in gold that will leave them breathless.”

Eric King
October 12, 2012
King World News

Today John Embry told King World News, “We are literally witnessing a war between the physical buyers (Eastern central banks), and the paper manipulators (commercials or bullion banks), and that is why there is such a fierce battle being waged in gold between $1,735 and $1,800.” Embry also stated, “If the commercials run into trouble (with their massive short positions), KWN readers will see a move in gold that will leave them breathless.”

Here is what Embry, who is Chief Investment Strategist at Sprott Asset Management, had to say: “This is one of those moments in the gold market where there is a distinct possibility that we will see a commercial signal failure. A commercial signal failure is an extremely rare event, but we could well be setting up for just such an occurrence right now.”

John Embry continues:

“The commercials are massively short gold at the moment, and each time they try attempt to drive the price of gold lower, there is a solid wall of physical buying they are running into. I just don’t think they anticipated this. Meanwhile, the Eastern buyers, such as China, are delighted the commercials keep trying to push gold lower.

But now we are getting to the point where there is a distinct possibility that the bullion banks may run into some serious trouble with their enormous short positions....

If the commercials run into trouble (with their massive short positions), KWN readers will see a move in gold that will leave them breathless. But you have to remember that this is a rare event, and it hasn’t happened yet.

When you look at what the IMF just stated about European banks having to deleverage $4.5 trillion of assets, who is going to buy that? It will be the ECB, and they will have to print money to accomplish that. The IMF has raised this $4.5 trillion figure once already, and you can be sure the final number will be even higher than what they are stating now.

This means there will be enormous money printing going forward. People in Europe can’t even begin to imagine the scale we are talking about. The ECB will do this printing in stages, in order to decrease the shock on the populace. There are too many people in the North, particularly in Germany, that are worried about a currency collapse. So this situation, like so many others, has to be managed very carefully.

People have talked about a $2 trillion bazooka in Europe, but the printing won’t stop at $2 trillion. Egon von Greyerz has talked about tens of trillions of dollars that will need to be printed. I just don’t think people fully understand what the corresponding move in gold will be as the money printing really begins to accelerate.

Jim Sinclair correctly identified that there would be ‘QE to infinity,’ and he has talked about this, but I still don’t think people truly grasp the horror of the destruction that will take place, in terms of the loss of purchasing power in the various fiat paper currencies as the printing presses are really heated up.

Circling back to gold, what this means is the demand for physical gold is only going to increase. This is why the price rise will steepen over time. The bottom line is the physical market is already tight with the current demand. As the demand increases, it will be very costly at that point to acquire physical gold.

If you bring this back around to my earlier comments about the possibility of a commercial signal failure, the countries in Asia have figured out the devaluation game and they are buying very large quantities of physical gold. So as I mentioned, they are the ‘wall‘ of buying the commercials are running into in the mid $1,700s.

We are literally witnessing a war between the physical buyers (Eastern central banks), and the paper manipulators (commercials or bullion banks), and that is why there is such a fierce battle being waged between $1,735 and $1,800. It will be fascinating, Eric, to see how this is resolved in the gold market.”

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