“China has recently been buying as much gold as being produced globally in the mines,” says Jay Taylor, Publisher of Jay Taylor’s Gold, Energy & Tech Stocks newsletter, in an interview with Smallcappower.com. Mr. Taylor explains why he thinks the gold futures markets are “gambling casinos,” provides his thoughts on the possible manipulation of the gold price, and talks about one stock in particular that he calls “possibly one of the most spectacular stories I’ve heard in a long time.” Companies mentioned in this interview include Novo Resources Corp. (CSE: NVO).
Video Transcription:
Tracy Bezeau: We’re here today with Jay Taylor of Jay Taylor’s Gold, Energy, and Tech Stocks. So are you surprised by the early strong performance of the gold price in 2014? And do you expect to pull back anytime soon?
Jay Taylor: No. You know, actually I think a bounce is expected. We’ve had such a dramatic decrease in the price of gold, from $1900 in 2011 to about $1100 in 2013. So I think it’s just natural that we get a bounce. Markets don’t go in one direction forever. So whether or not we are through this cyclical bear market inside of a secular bowl is the big question in my mind, and I’m not sure of that yet. I think we could be. A lot of the technical analysts that I follow though are quite convinced that we have another down lag, that we could actually see a test of the $1100 lows. But most of those analysts also think by mid-year or so, we’re going to be looking at a major rise in the bowl market, a major rise in the price of gold, probably taking us to new highs beyond the old highs of $1900 an ounce.
Tracy Bezeau: With the Chinese buying so much gold recently, why do you think the price of gold is so weak?
Jay Taylor: Well, I think there’s two markets for gold actually. There is a physical market, which is what you’re talking about when you say the Chinese are buying so much gold. As a matter of fact, the Chinese have recently been buying as much gold as being produced in the mines. It’s an astounding amount of gold. Plus, the Chinese are now the largest gold producer themselves.
So the amount of gold– China is building up the gold reserves, I think because they really want to see the dollar released from its duty as the world’s reserve currency. So we’re going to see, I think, continuous buying of gold by China. The physical market has been very strong. On the other hand, the paper market, which is the one you’re referring to– Whenever we quote the price of gold, it’s based on the future’s markets in New York and London and such. Those are just really gambling casinos. They’re supposed to be representing the underlying commodity, but it’s something like 100 or 110 times more paper.
So one guy says the gold price is going up, so he takes a long contract. The other guy thinks the gold price is going down. He takes the short contract. So they’re betting against the movement of the market. They’re not really looking at the physical demand for gold because all of those contracts are settled. They actually– Before the maturity date or before the delivery date, they wash them out. So essentially, it’s a fictitious market, I think, the paper market that’s used. Ultimately the real market is going to rule the day. But until people demand delivery from the COMEX or the other major exchanges and really cause them to default, I think when that happens, I think you’re going to see the gold price rise to very dramatically much higher levels.
High gold prices are justified by the fact that the amount of money that’s printed since Bernanke did his quantitative easing has just skyrocketed. So what we’re looking at is not that gold has gotten more valuable, but that the currencies have become less valuable because there’s so much dollar, so many dollars have been created. Not only dollars, but all the central banks around the world are printing huge amounts of money. So whenever you have the supply of something going up, its value goes down. Gold cannot be created so easily. It’s a heck of a job to get gold out of the mines, as these companies here at this show can tell you.
They have to spend huge numbers of years, huge amounts of capital, send men down into the ground, sometimes a mile down under. It’s very difficult. So you can’t create gold. The markets have always decided that gold is money. If they’re left to their own resolve, markets always choose gold because it’s an asset-based money. They don’t trust the politicians. The Chinese don’t trust the politicians. That’s why they’re buying gold.
Americans have been duped into trusting their politicians. They still trust Mr. Bernanke and the P.H.D. standard instead of the gold standard, but that’s going to come to an end. How soon? I don’t know. But I do think that we’re– As it becomes so evident that the American economy is not responding to quantitative easing, I think it’s just a matter of time before we start to see the gold price and Americans themselves start losing confidence in the dollar. Then I think we’re going to see the gold price rise to much higher levels.
Tracy Bezeau: A recent Financial Times article put forth new potential evidence of gold price manipulation by the big banks. How do you think this will affect the gold market going forward?
Jay Taylor: You know, it’s hard to say. How long can things remain manipulated is a good question. I mean, there’s always talk about manipulation. I’ve wondered why it’s taken so long for the major media to start addressing this issue of manipulation in gold, because everything else is manipulated. We’ve had LIBOR manipulation. We’ve had housing market manipulation. We’ve had manipulation everywhere. Why wouldn’t the gold markets be manipulated too? There’s been evidence by the Gold Antitrust Action Committee for many years, providing very substantial evidence that the powers that be, the people that want to see the dollar remain the world’s reserve currency, don’t want gold to rise very dramatically because if they do, people will jump from the dollars and go into gold.
The people that print the money will lose their power and their ability to essentially take wealth away from those that produce it and put it in the hands of the bankers. Essentially the bankers and the government have been taking the wealth away from the people that actually produce it. So what they’re trying to do is keep people conned into believing in the dollar. Well, that doesn’t work if the gold price goes up, and people say, “Oh my gosh. The gold price is going up. It’s $1000. It’s $2000. It’s $3000. I better get some gold.” They sell their dollars, and they get gold, and that’s the last thing they want.
So in order to keep the con game going, the establishment has to keep people conned into, convinced that the dollar, paper money, is better than gold. So to the extent that this revelation wakes people up to the fact, then it could be any time. We could see the gold price take off. It’s just hard to tell because it’s really a con game. It’s a confidence issue.
Tracy Bezeau: So are you currently bullish on gold right now?
Jay Taylor: Yeah. I mean, I’m bullish long-term on gold right now. What it does in the next month or two, I don’t know. I think that some of the technical analysts that are looking at a gold price that could go back down to $1100 or so, or even $1000. They could be right. But I’ve been a secular bull since 2000. I mean, gold was at $250 in 2002. It got to $1900. It had 10 consecutive years of up years that gold rose. That’s unheard of in any bull market. So that we had 2013, it was a down year. But I don’t think that this bull market, this secular bull market, is over yet because what we have– The global economy has not been fixed. If anything, it’s continuing to get worse because they’re creating more money.
They’re trying to– They’re really, essentially, using the very thing that caused the problem to try and fix it. More debt money instead of realizing that we have to reduce the debt in the economy. We have to get back to the normal debt-to-equity levels, debt-to-G.D.P. levels, and until that happens, I’ll remain very bullish on gold long-term. Short-term, here and there, now and then, I don’t know. But long-term, very bullish on gold.
Tracy Bezeau: Which junior resource stocks do you like at this time?
Jay Taylor: You know, there’s a lot of them, and there’s too many of them to mention right now in the short time that we have. But there’s one that I really like in particular, because I think that it’s possibly one of the most spectacular stories that I’ve heard of in a long time. You know, there is a mine called the Witwatersrand mine in South Africa that has produced 1.6 billion ounces of gold. All the rest of the mines combined have not produced that much gold.
So there’s a very interesting geologist, Doctor Quinton Hennigh, who has come up with a theory in terms of how was the Witwatersrand gold produced. It’s a long story we don’t have time to go into. But suffice it to say, he believes he’s found an area in Australia that is the lookalike of the Witwatersrand. The early exploration has come up with about 420,000 ounces on a very small area of this target. So that’s one that I like very much. It’s called Novo Resources and Trades in Toronto. There are many more, but that’s one that IFemale Voice: The Small Cap Power expert interview. [music].
Tracy Bezeau: We’re here today with Jay Taylor of Jay Taylor’s Gold, Energy, and Tech Stocks. So are you surprised by the early strong performance of the gold price in 2014? And do you expect to pull back anytime soon?
Jay Taylor: No. You know, actually I think a bounce is expected. We’ve had such a dramatic decrease in the price of gold, from $1900 in 2011 to about $1100 in 2013. So I think it’s just natural that we get a bounce. Markets don’t go in one direction forever. So whether or not we are through this cyclical bear market inside of a secular bowl is the big question in my mind, and I’m not sure of that yet. I think we could be. A lot of the technical analysts that I follow though are quite convinced that we have another down lag, that we could actually see a test of the $1100 lows. But most of those analysts also think by mid-year or so, we’re going to be looking at a major rise in the bowl market, a major rise in the price of gold, probably taking us to new highs beyond the old highs of $1900 an ounce.
Tracy Bezeau: With the Chinese buying so much gold recently, why do you think the price of gold is so weak?
Jay Taylor: Well, I think there’s two markets for gold actually. There is a physical market, which is what you’re talking about when you say the Chinese are buying so much gold. As a matter of fact, the Chinese have recently been buying as much gold as being produced in the mines. It’s an astounding amount of gold. Plus, the Chinese are now the largest gold producer themselves.
So the amount of gold– China is building up the gold reserves, I think because they really want to see the dollar released from its duty as the world’s reserve currency. So we’re going to see, I think, continuous buying of gold by China. The physical market has been very strong. On the other hand, the paper market, which is the one you’re referring to– Whenever we quote the price of gold, it’s based on the future’s markets in New York and London and such. Those are just really gambling casinos. They’re supposed to be representing the underlying commodity, but it’s something like 100 or 110 times more paper.
So one guy says the gold price is going up, so he takes a long contract. The other guy thinks the gold price is going down. He takes the short contract. So they’re betting against the movement of the market. They’re not really looking at the physical demand for gold because all of those contracts are settled. They actually– Before the maturity date or before the delivery date, they wash them out. So essentially, it’s a fictitious market, I think, the paper market that’s used. Ultimately the real market is going to rule the day. But until people demand delivery from the COMEX or the other major exchanges and really cause them to default, I think when that happens, I think you’re going to see the gold price rise to very dramatically much higher levels.
High gold prices are justified by the fact that the amount of money that’s printed since Bernanke did his quantitative easing has just skyrocketed. So what we’re looking at is not that gold has gotten more valuable, but that the currencies have become less valuable because there’s so much dollar, so many dollars have been created. Not only dollars, but all the central banks around the world are printing huge amounts of money. So whenever you have the supply of something going up, its value goes down. Gold cannot be created so easily. It’s a heck of a job to get gold out of the mines, as these companies here at this show can tell you.
They have to spend huge numbers of years, huge amounts of capital, send men down into the ground, sometimes a mile down under. It’s very difficult. So you can’t create gold. The markets have always decided that gold is money. If they’re left to their own resolve, markets always choose gold because it’s an asset-based money. They don’t trust the politicians. The Chinese don’t trust the politicians. That’s why they’re buying gold.
Americans have been duped into trusting their politicians. They still trust Mr. Bernanke and the P.H.D. standard instead of the gold standard, but that’s going to come to an end. How soon? I don’t know. But I do think that we’re– As it becomes so evident that the American economy is not responding to quantitative easing, I think it’s just a matter of time before we start to see the gold price and Americans themselves start losing confidence in the dollar. Then I think we’re going to see the gold price rise to much higher levels.
Tracy Bezeau: A recent Financial Times article put forth new potential evidence of gold price manipulation by the big banks. How do you think this will affect the gold market going forward?
Jay Taylor: You know, it’s hard to say. How long can things remain manipulated is a good question. I mean, there’s always talk about manipulation. I’ve wondered why it’s taken so long for the major media to start addressing this issue of manipulation in gold, because everything else is manipulated. We’ve had LIBOR manipulation. We’ve had housing market manipulation. We’ve had manipulation everywhere. Why wouldn’t the gold markets be manipulated too? There’s been evidence by the Gold Antitrust Action Committee for many years, providing very substantial evidence that the powers that be, the people that want to see the dollar remain the world’s reserve currency, don’t want gold to rise very dramatically because if they do, people will jump from the dollars and go into gold.
The people that print the money will lose their power and their ability to essentially take wealth away from those that produce it and put it in the hands of the bankers. Essentially the bankers and the government have been taking the wealth away from the people that actually produce it. So what they’re trying to do is keep people conned into believing in the dollar. Well, that doesn’t work if the gold price goes up, and people say, “Oh my gosh. The gold price is going up. It’s $1000. It’s $2000. It’s $3000. I better get some gold.” They sell their dollars, and they get gold, and that’s the last thing they want.
So in order to keep the con game going, the establishment has to keep people conned into, convinced that the dollar, paper money, is better than gold. So to the extent that this revelation wakes people up to the fact, then it could be any time. We could see the gold price take off. It’s just hard to tell because it’s really a con game. It’s a confidence issue.
Tracy Bezeau: So are you currently bullish on gold right now?
Jay Taylor: Yeah. I mean, I’m bullish long-term on gold right now. What it does in the next month or two, I don’t know. I think that some of the technical analysts that are looking at a gold price that could go back down to $1100 or so, or even $1000. They could be right. But I’ve been a secular bull since 2000. I mean, gold was at $250 in 2002. It got to $1900. It had 10 consecutive years of up years that gold rose. That’s unheard of in any bull market. So that we had 2013, it was a down year. But I don’t think that this bull market, this secular bull market, is over yet because what we have– The global economy has not been fixed. If anything, it’s continuing to get worse because they’re creating more money.
They’re trying to– They’re really, essentially, using the very thing that caused the problem to try and fix it. More debt money instead of realizing that we have to reduce the debt in the economy. We have to get back to the normal debt-to-equity levels, debt-to-G.D.P. levels, and until that happens, I’ll remain very bullish on gold long-term. Short-term, here and there, now and then, I don’t know. But long-term, very bullish on gold.
Tracy Bezeau: Which junior resource stocks do you like at this time?
Jay Taylor: You know, there’s a lot of them, and there’s too many of them to mention right now in the short time that we have. But there’s one that I really like in particular, because I think that it’s possibly one of the most spectacular stories that I’ve heard of in a long time. You know, there is a mine called the Witwatersrand mine in South Africa that has produced 1.6 billion ounces of gold. All the rest of the mines combined have not produced that much gold.
So there’s a very interesting geologist, Doctor Quinton Hennigh, who has come up with a theory in terms of how was the Witwatersrand gold produced. It’s a long story we don’t have time to go into. But suffice it to say, he believes he’s found an area in Australia that is the lookalike of the Witwatersrand. The early exploration has come up with about 420,000 ounces on a very small area of this target. So that’s one that I like very much. It’s called Novo Resources and Trades in Toronto. There are many more, but that’s one that I would hold up as a very special situation.
Tracy Bezeau: Great. Well, thank you very much, Jay, for your time.
Jay Taylor: You’re welcome. Thank you.
Tracy Bezeau: I appreciate it. Thanks.
Female Voice: Keep up to date with all your favorite Small Caps. Subscribe to our free daily newsletter, featuring investment ideas, breakout stocks, analyst research, and more. Smallcappower.com. Investing ideas and research. [music].
would hold up as a very special situation.
Tracy Bezeau: Great. Well, thank you very much, Jay, for your time.
Jay Taylor: You’re welcome. Thank you.
Tracy Bezeau: I appreciate it. Thanks.
Female Voice: Keep up to date with all your favorite Small Caps. Subscribe to our free daily newsletter, featuring investment ideas, breakout stocks, analyst research, and more. Smallcappower.com. Investing ideas and research. [music].
