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Jay Taylor Urges Investors to Stay Liquid for the Coming Gold Boom

 -- Published: Tuesday, 30 September 2014 | Print  | Disqus 


Source: Kevin Michael Grace of The Gold Report  


Jay Taylor doesn't beat around the bush—he believes the price of gold is being suppressed to support the U.S. dollar and underwrite American foreign policy. But the publisher and editor of J. Taylor's Gold, Energy & Tech Stocks and host of the radio show "Turning Hard Times into Good Times" thinks that this suppression will fail, just as it did in the 1970s, when gold rose over 2,300%. In this interview with The Gold Report, Taylor urges investors to stay as liquid as possible so they can invest in undervalued companies poised to explode when the value of gold is reasserted.


The Gold Report: The price of gold has fallen more than $130 an ounce ($130/oz) since July. Why?


Jay Taylor: I believe we have two different markets. One is an honest market for physical metal. The other is a market that has increasingly become less than honest. The latter is a paper market, primarily in London and New York, and it is used to muddy the waters of price discovery with gold and silver. This paper market price is assumed to be the real price of gold. I don't think that's true.


There is a need on the part of Wall Street, and the ruling elite within the Anglo-American empire, to keep people uninterested in honest money and real gold because dishonest enterprises must keep people from knowing the truth. What we have essentially is a fiat currency system that is devised to allow those in charge of the monetary system to profit at the expense of the real producers of wealth: the miners, the manufacturers, the farmers, the inventors. The people that produce useful things are having their wealth confiscated clandestinely by this monetary scheme.


TGR: You have written that "the rigging in the gold price in New York and London is accomplished by a handful of major bullion banks that just happen to be the biggest shareholders of the Federal Reserve." How is this rigging accomplished?


JT: It's accomplished through massive futures markets selling on the Comex and the London markets. It is like a casino. There is a 100 to 1 ratio of gold futures bought to actual gold settlement. We see huge amounts of selling coming into the market at exactly the times we would expect gold to do well. The futures markets are so highly leveraged that a very small amount of actual dollars are needed to drive the gold price down.


The players here, the big banks, have the largest shareholdings of the Federal Reserve. They have access to massive amounts of money created out of nothing. It is interesting to note that, especially for platinum, palladium and silver, a large premium, up to 24% in the case of palladium, is being paid by people in the physical markets of Shanghai. The premium for silver has been around 14%, and the premium for platinum has been between that of palladium and silver.


TGR: The rigging downward of gold, silver and other metals would obviously harm the mining industry profoundly. So why isn't the industry complaining?


JT: I don't think the major mining companies understand the product they're selling. I don't think they understand that gold, and to a lesser degree, silver, are, in fact, money designed by nature and not decreed by human beings. They have been taught to believe, by men and women with Ph.D.s from Princeton, Harvard and Yale, that gold is a "barbarous relic."


The World Gold Council, which is funded by those same CEOs who do not understand the product they sell, promotes gold as jewelry. That is simply, with all due respect, asinine because the greater the amount of gold taken off the market for jewelry, the lower gold is priced. What would really boost the gold industry would be an understanding that gold is honest money and that fiat money is dishonest. A lot of the junior miners sort of understand this. They're more supportive of the Gold Anti-Trust Action Committee (GATA).


TGR: How long can this rigging continue?


JT: It's really a question of how long confidence in the U.S. dollar can be maintained. The BRIC countries are forming their own financial infrastructure to compete with the dollar. Sanctions directed by the United States against Russia are pushing Russia into the arms of China, which makes the BRIC countries stronger. China is the largest gold producer in the world and has supposedly imported huge amounts of gold in recent years. Also, as tensions with Russia have been rising, that country has also has been importing large amounts of gold, as the chart below illustrates.


If we had an honest monetary system with gold at the center, we could not issue endless amounts of money to finance the war machinery. The U.S. went off the gold standard in 1971 because it wanted socialism and the ability to wage war without telling the people they had to pay for it. I don't know how long our pathological monetary system can last, but the handwriting is on the wall. As I look at the continuing decline of western economies, including that of the U.S., I feel the day of reckoning is drawing near. I can't imagine we won't see a major breakdown in the global financial system within a year from now.


TGR: Capital continues to seek the U.S. dollar. The Dow and the S&P 500 continue to hit record highs, while the headline unemployment number falls. Are we looking at an economic recovery, or could we face another repeat of the 2007–2008 crisis?


JT: I don't believe that we've had a recovery. If we have, it's the most tepid in history. The number of people in the labor force continues to decline, and inflation is certainly not the 1% or 2% our government pretends it is. The top 1% in the western world have done extremely well, while the middle class is being hollowed out. Talk of recovery is a fraud that keeps people pacified. The large corporate interests in America don't want change because the banks, through the Federal Reserve, can print all the dollars they want, and they now have purchased Congress and the executive branch of the American government.


TGR: How does the present situation for gold resemble what happened in the late 1970s, when it rose more than 2,300%?


JT: There is a case to be made that a much bigger rise could occur. The ratio of money being created relative to GDP—even if you take the government's GDP numbers at face value, which I do not—is much greater now than it was in the 1970s.


I'm still agnostic as to whether the economy goes into hyperinflation or massive deflation. After a deflationary implosion, the nominal price of gold would not necessarily rise, but its purchasing power would rise dramatically. If the masses become outraged over the fall in their living standards, we could see money printed and thrown to them from helicopters. I pray to God that doesn't happen, because hyperinflation is the worst of all outcomes. The debasement of the dollar will continue. If this leads to a flight from the dollar, we could see a sudden and dramatic shift of capital from paper money into real goods, such as gold.


TGR: Will gold stocks lead or lag the gold price breakout?


JT: I think they have been leading already. My gold share values are up low double digits from the bottom. I'm seeing wonderful opportunities in precious metals equities. These markets are true markets, unlike the fraudulent paper markets for gold and silver.


TGR: You have stated your firm belief that the price of gold cannot remain suppressed for much longer. But as John Maynard Keynes reminded us, "Markets can remain irrational a lot longer than you and I can remain solvent." Many investors in gold companies have felt the sting of Keynes' word for more than three years now. What should they do?


JT: Well-managed companies with good projects and the ability to raise money will survive. Many juniors are not in that position, and will be gobbled up or be subjected to the huge rollbacks that kill early investors. Obviously, not putting all your eggs in the precious metals basket would have been wise, and still is. I do not, however, advocate big investments in the wider equities markets now, because they are long in the tooth and could be rolled back substantially themselves.


Investors should keep some cash and build some cash. I've sold stocks at a loss to make sure I have cash for when this market finally turns around. There's some enormously attractive junior gold and silver mining companies out there, so investors need to keep liquid. Investors should find liquid companies that have valuable assets and can stay the course; companies with managements that are careful about how they structure their shares and their financings.


TGR: Jay, thank you for your time and your insights.


As he followed the demolition of the U.S. gold standard and the rapid rise in the national debt, Jay Taylor's interest in U.S. monetary and fiscal policy grew, particularly as it related to gold. He began publishing North American Gold Mining Stocks in 1981. In 1997, he decided to pursue his avocation as a new full-time career—including publication of his weekly J. Taylor's Gold, Energy & Tech Stocks newsletter. He also has a radio program, "Turning Hard Times Into Good Times."


1) Kevin Michael Grace conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor.
2) Jay Taylor: I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview. 
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