In view of the on-going manipulation in the gold and silver paper markets, I have decided to do a multi-interview with two prominent voices in the precious metal markets, and ask them exactly the same questions about gold and silver manipulation : Chris Powell (GATA), Jim Willie (Goldenjackass.com) and James Rickards.
Here is the third interview with James Rickards.
The Children's Investment Fund Management LLP is a London-based hedge fund firm better known by its acronym TCI. Founded by Sir Chris Hohn in 2003, the fund has a global mandate and supports the Children's Investment Fund Foundation (CIFF). Q3 2021 hedge fund letters, conferences and more The CIFF was established in 2002 by Hohn Read More
James Rickards is the author of the national bestseller, “Currency Wars: The Making of the Next Global Crisis” and a Partner in Tangent Capital Partners, a merchant bank based in New York. He is a counselor and investment advisor and has held senior positions at Citibank, Long-Term Capital Management and Caxton Associates. In 1998, he was the principal negotiator of the rescue of LTCM sponsored by the Federal Reserve. His clients include institutional investors and government directorates. He has been interviewed in The Wall Street Journal and has appeared on CNBC, Bloomberg, Fox, CNN, BBC and NPR and is an Op-Ed contributor to the Financial Times, New York Times and Washington Post. Mr. Rickards is a visiting lecturer at Johns Hopkins University and the School of Advanced International Studies, has delivered papers on risk at Singularity University, the Applied Physics Laboratory and the Los Alamos National Laboratory and has written numerous articles on risk management. He is an advisor on capital markets to the Director of National Intelligence and the Office of the Secretary of Defense. Mr. Rickards holds an LL.M. (Taxation) from the NYU School of Law; a J.D. from the University of Pennsylvania Law School; an M.A. in economics from SAIS and a B.A. from Johns Hopkins.
Fabrice Drouin Ristori
Fabrice Drouin Ristori:Mr Rickards, thanks for accepting this interview. How long the manipulation of the precious metal markets can last ?
James Rickards: Central bank manipulation of gold markets can and will last until physical shortages become so acute that banks and exchanges can no longer deliver on futures and forward contacts when requested by customers. At that point, contracts will be terminated and exchanges will order that trading be conducted “for liquidation only” which means that futures customers can close out or rollover contacts, but they cannot receive physical delivery of gold.
FDR: What will put an end to it ? Physical demand ? Geopolitical event (BRICS) ?
JR: Physical demand will remain strong until the world returns to a gold standard. Once the world is on a gold standard, gold may move from country to country in settlement of balance of payments accounts, but there will be no reason to acquire extra gold because the value of gold will be fixed in terms of each major currency. When you are on a gold standard, gold and currency are freely interchangeable. However, gold will continue to be in demand until a gold standard is implemented. This is because the market price of gold is considerably less than the implied non-deflationary price of gold under a gold standard. As long as this situation prevails, there will be an arbitrage motive to exchange currency for gold.
FDR: What will be the signs proving that the manipulation is ending ?
JR: The signs that the manipulation is coming to an end will include depletion of warehouses, price spikes and notifications from banks that they will no longer allow the conversion of gold forward contacts into physical gold.
FDR: Do you anticipate an overnight ending of the manipulation or a progressive process?
JR: Both. The process will proceed slowly at first, then gain momentum, then reach a panic buying stage where the termination of deliveries under futures and forward contacts will be announced very suddenly. At that point, physical gold will be scarce and interested parties will not be able to acquire it in small quantities at any price.
FDR: Is the gold/silver paper spot price still relevant to value physical gold and silver ?
JR: It is relevant in the sense that it is still possible to acquire gold and silver at prices significantly below the implied non-deflationary price under a gold standard. This is a type of arbitrage that will be available until the world returns to a gold standard or until countries use executive orders to abolish gold trading.
FDR: What direct consequences would a free gold/silver market have on people worldwide — not investors, people in general ?
JW: We have a free gold/silver market today. Anyone can buy or sell as much gold or silver as they like at market prices and exchange it freely with willing counterparties. To the extent that central banks act to depress the price of gold or silver, this acts like a gift to those interested in purchasing it at an artificially low price. If the world returned to a gold standard, the price of gold would be boring and the trading uninteresting because it would be fixed in terms of a currency and interchangeable with the currency.
FDR: I would like to thanks again James Rickards for taking the time for this interview.