Summary:
Jim Sinclair, chairman of the Independent Advisory Board at the Singapore Precious Metals Exchange, explains why precious metals are an alternative to fiat currencies as the U.S. heads towards hyperinflation.
Transcript:
Jim Sinclair:
We have a hyperstimulation situation yet not translating into prices. My view is inflation is monetary aggregates. Prices are the product of those. And the means or vehicle that takes that to the product is the velocity of money.
Now the velocity of money is how many times a dollar unit is used. The recovery is there. We do have it the incipient insignificant figures to the positive side.
But the recovery is not broad. So main stream is not participating as much as it would, in the end the turnover in currency is therefore low. So a recovery that will become general which stimulate the transition of inflation from the increase in stimulation to the increase in prices. That would then translate into better prices for the precious metals.
Sri Jegarajah:
what do you look at the physical market? What I have been hearing consistently is the movement from West to East. Demand here remains fairly resilient. is that how you would characterise it?
Jim:
Here is for savings. Gold is for savings while in the in the West, Gold is for speculation. That’s the difference.
Sri:
Bernard, come in here.
Bernard Lo:
I’d like to. Appreciate Jim appearing in in Hong Kong.
Can we talk beyond gold. I’m just curious. It wasn’t that long ago that I used to talk about orderly premiums in orderly pricing in the precious metal space. That you know the rule was that white platinum had a certain premium over gold, which had a certain premium over silver, and Palladium, I think 10 years ago, the Chinese found that they could actually make jewellery and do other things with it than just keeping it in bars.
But have we recovered some semblance of normalcy in the metals market, or are pricing still all over the place and very dependent on singularities? You know, what gold bugs are doing? What silver bugs are doing?
Jim:
The prices is less dependent on that at the present time, because as you depreciate in price, you also depreciate in demand.
Sri:
Jim, we’re gonna around this discussion off. Let me just put this to you. There’s been accusations of price distortion and manipulation on the COMEX gold futures market. You are looking to set up a platform here in Asia. How can you avoid that, and clearly if we have more price discovery, that’ll also be good, isn’t it?
Jim:
What we’re intending to set up in six other locations is trading platforms for the physical metal itself. For the spot metal. For instant payment. For instant cash receipt. It’s the use of paper that allows manipulation, because you can multiply your interest so much. If you have to pay for it or if you have to deliver it, you can’t. This is a trend we see in the markets we believe will sustain any exchange that begins to trade the physical on a cash basis.
Source: CNBC, Squawk Box, Commodities Corner, November 18, 2013