Saturday, May 25, 2013
Marc Faber: Central Banks Should Be Manipulating Gold Higher, Not Lower
The following is a partial transcript of Dr. Marc Faber's interview airing for subscribers on Friday:
Jim Puplava: Joining me on the program today is Dr. Marc Faber who heads up the Gloom, Boom, and Doom report. And, Marc, recently we’ve seen a precipitous fall in gold unlike anything seen in a few years. I’d like to get your take: What’s behind this fall in gold? Because it took the markets by surprise—there’s a lot of theories out there, including this week in Barron’s by Randall Forsythe saying that, this time, gold bugs may have a point. What are your thoughts?
Dr. Marc Faber: Well, there are many theories why the price went down. Simply put, there were more sellers than buyers. Now, of course, a lot of people have all kinds of theories that people manipulate the market down and so forth. That might be the case. I don’t have a clue. Now, rather than say it has been the case or hasn’t been the case it may be worthwhile to analyze why someone has an interest to manipulate the price of gold down. As you may know, Eric Sprott has maintained for some time that central banks, particularly the U.S, don’t have the gold anymore—that they leased it out and there may have been a shortage and so central banks may have had the inclination to suppress the price for whatever reason. So, can you explain to me why—and I never overestimate the intelligence of western central bankers—why would someone in the west want to suppress the price and enable the Asian central bankers to buy gold at the depressed price? I just don’t see it that way. Number 2: One more reason why a central bank would want to suppress the price and that is expropriation. In 1933, the U.S. collected all the gold that U.S. citizens held, and then they revalued it to $35. So the people that owned gold [previously] missed out on this appreciation. It amounted, basically, to a devaluation of the dollar against gold by over 30%. Now, a western central bank, say the Federal Reserve, could say, “Okay, let’s depress the gold price down to $1000 or below and then we’ll declare gold holdings to be illegal and then we will buy at the prevailing price. Then, once they’ve collected all the gold they can revalue it at, say, $10,000. Is this likely? I don’t think the central bankers would be smart enough to think of that. And, technically, it would be quite difficult to implement. So, I can’t see it really happening, but this would be a motive to depress the price artificially. Otherwise, actually, central bankers would have an interest to push the price up because they own most of the gold.
In the rest of this interview, Marc explains a very important difference between central banks leasing gold versus selling their gold along with a large number of other topics, including:
-Does massive retail buying of gold signify a bottom?
-Whether he’s buying at these prices
-What a strong dollar means for financial assets around the world
-The impact of a falling Yen on other Asian countries
-What export statistics from each of China’s trading partners say about the alarming state of China’s economy?
-Where he is investing currently
-Why investors should diversify
-Why the market has been much more volatile since the inception of the Federal Reserve
-What the biggest mistake investors make is
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