A Seeking Alpha article titled ‘John Embry: Gold and Silver Are the Ultimate Insurance Policy’ details a recent interview of Embry by Andrew Mickey, Editor of the Prosperity Dispatch with John Embry, described as “one of the leading gold investors in the world”.  In the interview Embry expresses the opinions and views that:

•    the recent divergence of the gold/silver ratio results from a “very strong manipulative aspect at work”;

•    silver is a smaller market than gold that can “be messed around with more easily” and likely has “a bit more upside potential (than gold) because the price is so far behind where it should be”;

•    with respect to gold supply going forward “we have most assuredly crested in terms of mine supply”;

•    at $2,000 – $3,000 no more gold could be produced than is produced now, and the lead time to produce gold that is found will increase to “maybe five to ten years”;

•    a lot of the existing mines are being depleted quite rapidly;

•    mines generally tend to sort of drop the grade they mine when the gold price increases, and keep higher grades on hand for times of lower prices;

•    the new interesting deposits being found in third world countries may not be developed or many be delayed in the future given government, permitting, profit-sharing, environmental, and other issues;

•    “the majors are reasonably priced compared to the overall list. People have sort of focused on liquidity so they have gone after the majors and they bid them up aggressively and left a lot of the more illiquid situations behind”;

•    as gold becomes more popular and the price rises, money will filter down the food chain from the larger companies and they will go looking for the good quality smaller ones;

•    he likes some of the smaller producers now and thinks they are “going to make a ton of money in the current environment, particularly if they are producing outside the United States”;

•    the costs of gold mining are dropping right now at the same time the price of gold is going up;

•    he’s “pretty bullish on small producers and anybody who has got a legitimate ore body that can be exploited sometime within the foreseeable future”.  He qualifies his comments in the case of the latter companies with the caveat that “the key thing to focus on is when their production will begin. If they don’t have to worry about getting through the environmental hurdles and getting the finance and et cetera, et cetera, they are going to make a lot of money”;

•    political risks and environmental concerns are not necessarily preventing a company from going into production, but they are certainly delaying it;

•    gold and silver are the ultimate insurance policy;

•    he is concerned that as he sees it there is what he calls ‘wiggle room’ in some of the gold ETF prospectuses, he wonders if some of the ETFs (including the largest, GLD) could be using paper derivative types of products instead of physical gold to back the stock.  He thinks there are ‘better vehicles’ than ETFs – but he doesn’t specify which these are;

•    “we are probably headed for the worst economic debacle since the Depression – if not worse than that”, where government response will be paper money creation that will result in hyperinflation;

•    he currently likes gold and silver, and nothing in the ‘financial sphere’.  He likes “the more solid companies providing basic services and what have you. We like the ones which don’t have overly leveraged balance sheets”;

•    he thinks there is a problem with uranium in the context of existing production, and he thinks there will be new discoveries.  He likes uranium in the context of its inelasticity (the principal cost of using uranium to generate energy is the cost of the reactor, not the uranium itself – therefore the price of uranium is largely inelastic;

The interviewer goes on to question Embry about his views on agriculture and infrastructure, among other things.  I suggest you take the time to link to the article and read Embry’s comments in context.  Most of what Embry says in the interview makes sense to me, although I am not a ‘manipulation theorist’ and gold and silver price manipulation – even if true – is based more on speculation than known fact.  Second, I don’t understand his comment about extending the time to get a mine into production to 5 – 10 years, unless he is saying that is a time period from after resources and reserves have been proven up to production.  As best I know, 5 – 10 years has for some time been a typical time frame from company inception when money is first raised through to production, assuming one company fully ‘plays the game out’.

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