Pregnant Pause On Air After the Elephant in the Room Speaketh

Posted: October 8, 2008 in Your Money, Your Silver Lining
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CNBC: Gold spike to “at least double the price [i.e. $1700/oz] in very, very short period”

Within the gold complex, there is a disparity between the paper market and the physical market, notes Jurg Kiener, CEO of Swiss Asia Capital. He tells CNBC’s Maura Fogarty & Rebecca Meehan that if the paper market collapses, gold prices may double very quickly.

Partial Transcript:

MEEHAN: I’m kind of surprised at where gold is trading, however because even though we see gold as a safe haven status given all the volatility in the markets lately gold hasn’t really reacted as positively. Why not?

KIENER: I think the paper market has really traded as positively as one might expect. When I say the paper market of gold I talk about COMEX and LME. If you look at the physical market, the physical market has been on fire. It’s getting very hard to buy one-ounce coins or smaller bars. Most jewellery shops have been running out. You can try some of the major banks. So we have a supply problem in supplying the feed. So what you have right now is a two-tier market. A paper market on Wall Street where the bankers continue to gamble like everything else, and the real market where gold is red hot and people can’t get physical.


MEEHAN: It’s Rebecca in Europe here. So what does that mean? That trend in the physical market. What does that mean for the gold market in general. If the economic conditions continue to deteriorate or stay as they are what does that mean for the gold market in general?

KIENER: First of all the stability in the financial markets where governments are destabilizing the savers, basically the person in power of the money, and if you get interest rate reductions almost close to zero then owning gold can probably be the best thing you can have. That’s going to put pressure on the paper markets, the LME and COMEX, and what I would like to see is actually some of the paper contracts defaulting, like you had the CDOs and the CDSs and whatever else out there defaulting I think we are going to get very close to see an environment where you are going to see the paper contracts on precious metal defaulting, and with that you are going to get a massive price increase in the overall prices of precious metal.

FOGARTY: Okay, were at 863 right now for COMEX gold. We checked on spot earlier around the 860 level as well. If you expect to see a spike when we see the paper market break down, in other words, where would that spike lead us to?

KIENER: At least to double the price.

FOGARTY: In… within a short amount of time?

KIENER: Very, very short period. It will spike up quite fast. If you think we had an oil rally going from $65/70 to $140 in nine months. I think you can double in gold in basically a much shorter period because the market is much smaller.

[And where gold goes silver follows.]


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