Eric Sprott - Aggressive Chinese Buying Will Spike Gold Price

Today billionaire Eric Sprott told King World News the Chinese cannot continue to buy gold as aggressively as they have been without there being a dramatic increase in the price.  Eric Sprott, Chairman of Sprott Asset Management, had this to say about Chinese purchases of gold and the recent announcement that Iranian oil will be acquired using gold:  “There are two things I think are important about that.  One, it’s a statement that gold is a currency.  That is by far the most important thing.  I think the other thing is, if it actually transpires that way, what does it mean for the demand for gold?  Because now it’s considered currency, it’s, in essence, your working capital.  You have to have it.  It’s like a store, you have to have money in the till.”

“So it’s obviously going to increase the demand for gold and we have seen some data that China has been a rather large buyer of gold.  People will consider it a currency and it has to necessitate more buying.  You know, Eric, I think one of the really interesting things that happened was the imports of gold into China, from Hong Kong, which always were less than 20 tons a month, all of the sudden, beginning about 5 months ago, went 20 (tons), 30, 40, 80 and in November 102 tons.  102 tons is a staggering number. The world mines, excluding China, less than 200 tons a month.  China cannot continue to buy 102 tons and not have the price escalate dramatically.”

Sprott had this to say about today’s Fed announcement that it will leave rates at zero until late 2014:  “Obviously it’s dramatic what has happened.  It would appear there will be no restraint whatsoever on the part of the Fed.  Assuming this announcement causes gold to break its declining wedge, which I believe it has, I expect some serious fireworks to the upside.” We’ve all heard the reports that it’s pretty tight (in terms of supply).  Every data point I see suggests people and institutions want to buy silver in the same dollar amount as they are buying gold. We see the US Mint has sold 5.6 million ounces so far in January and I’m sure they will have a record high month.  We’re selling as many dollars of silver coins as we are gold coins by the mint, which means we are selling 50 times more physical volume of silver.  The availability (of silver to gold) is 7 to 1 in physical, but people are buying it at like 50 to 1.  So something has to give there.

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