GFMS warns of extremely negative fundamentals for gold, silver

GFMS Executive Chairman Philip Klapwijk reckons that fundamentals for both gold and silver are extremely negative, although he concedes that current government policies might prolong the bull markets a little further.

NEW YORK  - 

Despite the New York Hard Assets convention normally being a haven for gold bugs, the first keynote speaker on the first day was not particularly taken with the near term prospects for precious metals.  The convention floor, though, was largely dominated by gold and silver miners who obviously feel otherwise, as do many of the newsletter writers attending the event.  

The keynote speaker Philip Klapwijk, Executive Chairman of GFMS, offered a highly analytical presentation covering gold and silver that almost grudgingly conceded that despite highly adverse fundamentals, gold could still rise a little over the remainder of the year, but not by as much as many analysts believe because fundamentals are currently so adverse.  

Silver's fundamentals were also seen as sufficiently poor to keep prices back, despite its traditional volatility which has tended to see it outperforming gold on the way up, and underperforming on the way down. 

Klapwijk's address was titled 'Is it game over for gold and silver, or has the bull market in these metals still got legs?' As noted above his feelings on gold were mixed, but purely on fundamental grounds, which have put supply into a substantial surplus, largely through a plunge in jewellery fabrication demand coupled with an inordinate amount of scrap coming on to the market. 

He suggested the current supply/demand balance should not support even the current gold price.  The fact that the gold price is as high as it is is thus down to investment demand, but if the stock market in general continues to climb, making people less risk averse, then money could start flowing out of investment gold (where the appetite seems already to be waning) back into general equities. 

Klapwijk painted an even gloomier picture on silver with rising mine supply and falling industrial demand moving the market to a substantial surplus.  But, he pointed out--while investment demand for gold has reached nearly one-third of the offtake as much of the world sees gold as money-- investment demand for silver lags far behind with only the diehards seeing silver as a monetary metal nowadays. 

Perhaps in favour of price rises, though, short term interest rates are at or near zero, government budget deficits are exploding and monetary supply growth is extremely rapid and inflation is likely to pick up strongly at some stage. 

Under normal circumstances, Klapwijk averred, we might have already seen peaks in price for both gold and silver, but central bank and governmental policies could prolong the bull market a little longer, but the adverse fundamentals will bring prices down eventually.  

Other points in favour of precious metals price rises could be that Central Banks are moving back to a stage where they seem to have less appetite for the selling off gold reserves; some are even beginning to buy which could continue to support gold, despite the adverse basic fundamentals.  Even so, he would not predict more than an $1100 peak for gold and a return to $20 silver as possible medium term high points for the metals.

In a Q and A session, in response to a question as to whether he would debate Bill Murphy of GATA on the latter's view that there is a global banking conspiracy to keep the gold price down, Klapwijk replied with a very definite "NO!"  He quoted Margaret Thatcher on the IRA in that he would not wish to give the GATA views the publicity that such a debate might generate. 

This strong statement was greeted with a round of applause from the audience, perhaps demonstrating that the New York Hard Assets conference is not quite such a venue for gold bugs after all.

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responses to this article

philip klaptrap... Actually, I think it's the other way around. I don't think Bill Murphy of GATA should honor this lackie for the central banker anti-gold cartel with the time of day, let alone waste his breath with someone with Klaptrap's agenda. I . .more also hope there aren't too many sound-thinking citizens of ANY country that will think his views on gold and silver are in the least bit objective. Let him/them say what they will...make sure you have at least some significant part of your wealth in physical / personally held gold and silver...and then wait and watch the ongoing destruction of probably ALL fiat currencies, except, perhaps, that one which ends up the new "reserve currency of the world...??the renmimbi perhaps?? Regardless of what it is, or if it becomes a "basket" of currencies, there will some type of gold/silver backing...watch and see...jt . .less by jt on May 12 2009, 03:46 Find this comment inappropriate? Report it

Phillip Klapwijk Lawrence Williams is an astute observer. The last paragraph of this article says it all. Phillip Klapwijk is not working in support of the mining industry. Nicely written article. by bill m on May 12 2009, 04:14 Find this comment inappropriate? Report it

Phillip Klapwijk Aaaaa. If "Bloody Maggie" was still Prime Minister Northern Ireland would not be free. by Pat O'Halloran on May 12 2009, 04:38 Find this comment inappropriate? Report it

MARKETS......... These markets will continue DOWN, and where will investors put their money as this market continues down. Obviously into something no one has control over, Gold and Silver especially. This is a disgrace, the handing out of 'scrip' to the people who . .more caused this mess. The banks were ordered by the governments of past and present to give money to those who did not qualify, to create a 'great' economy, for 'them' to look good. . .less by j. campone on May 12 2009, 06:08 Find this comment inappropriate? Report it

China oops... does China know that Sir Klapwijk has decreed that their 400 tonne purchase was all for nought? Better sell the shiny yellow stuff and get lots of luverly T bills paying 2 per cent. by Lod Max on May 12 2009, 07:03 Find this comment inappropriate? Report it

klapklap usually gold goes up when one of these talks...let's see... by ben on May 12 2009, 07:50 Find this comment inappropriate? Report it

Adverse fundamentals? It's easy to weave words like "adverse fundamentals" into a speech. But someone should ask this gentleman to specify and enumerate what exactly those "adverse fundamentals" for silver are supposed to be? If he can name a few, let's say three, he may . .more be able to get me to sell my metal. In the meantime I'll hold tightly on to it. ;-) . .less by Peter R on May 12 2009, 07:58 Find this comment inappropriate? Report it

Silver has Adverse Fundamentals at $20 - WTF? If even this nay sayer reckons $20 silver is possible with adverse fundamentals when only a few months back you could buy silver for $10/oz - all I can say to that is "bring it on baby, shower my silver backed IRA with buckets loads of adversity!" by GH on May 12 2009, 08:30 Find this comment inappropriate? Report it

klapklap Paid fanatics in the history of the world have existed from the time of Adam and Eve. So has the law of supply and demand. Klapklap's hard assets seem to be softer than cotton. by factandveritas on May 12 2009, 08:42 Find this comment inappropriate? Report it

Don't be too hard on Phillip Don't be too hard on Phillip. He is only saying what he's been told to say. He is not bright enough to know the difference between hard assets and crinkly toilet paper. Fred25 by Fred25 on May 12 2009, 11:40 Find this comment inappropriate? Report it

Th..e Bank for International Settlement reports in 2 weeks time You can expect them to tell you exactly what sort of mess the worlds economic system is in.The unserviceable paper ie fiat currencies and bonds that are busy destroying our financial system will weigh in favour of buying gold as will the derivative . .more market which is said to be north of $600trillion. Hyperinflation is set to rock world markets which again good for gold. So as for mnr kaktrap lets have those fundamentals kid. . .less by RUS on May 12 2009, 23:40 Find this comment inappropriate? Report it

ECB Well, probably they do not have much more left of the ammunition to keep the gold-silver price down. In March -April to stop the price rise, the European central Bank was dumping by 10 tonnes of physical gold on the market - toatl 50 . .more tonnes in one month. Just a week ago they dumped addtional 37 tonnes of physial gold to prevent the price rise. probably not much more left. fort knox is empty. ECB vaults are half depleted. Only big mouth bribed crooks like this Kalpwik - is their last hope to prevent the rise. Yet, they already probably prepared - bought put options in bulk. . .less by fred26 on May 13 2009, 05:23 Find this comment inappropriate? Report it

I have a different take on the IRA/GATA comment... I was in the audience and I have a very different take on the IRA/GATA comment... I personally was applauding "the suggestion of the debate" and not his answer. by riskjunkie on May 13 2009, 06:11 Find this comment inappropriate? Report it

Liars and thiefs F*** Philip Klapwijk and Nandler, Do they suck each others C***? How does that affect market sentiment? by Joe on May 14 2009, 00:21 Find this comment inappropriate? Report it

liars and theifs That chickenshit Nandler or Klapwijk doesn't have the balls to debate Bill Murphy of the Gold Anti Trust Action Committee as I believe they are market manipulating degenerate paid off jack wacks. They are the jesters of disinformation. I would love . .more to debate both of them on National television... . .less by Joe on May 14 2009, 00:30 Find this comment inappropriate? Report it

Wow.... I had no idea that there were so many people of this caliber punting gold. Why is there so much emotion attached to this metal? There is so much gold in the ETF coffers ( we hope) that when the computers get a whiff that the price is going down they . .more will ditch regardless of whether it is a fiat hedge or shiny or gives you a fuzzy feeling. A commodity is a commodity. It is all about supply and demand. The Chinese are quietly buying up their own supply so no movement . Indians are broke so no buying and every man and his dog in the world who needs money is selling their gold including teeth. Oh and by the way, the central banks hold all the gold, USA the most, so why would they want to suppress the price. Just let it continue as a commodity. IMF selling all their stash to help poor countries like SA will not help the price either. . .less by and Zen on May 14 2009, 02:34 Find this comment inappropriate? Report it

and Zen, couldn't agree with you more If gold drops, then a massive selloff will occur, since at least 50% of gold demand is ETF driven. The big emphasis is IF gold drops, and also, what point will constitute the trigger. THe USD is tanking, and gold is not rising. So if this doesn't do . .more it, then what will? You also have the double wammy as a south african investor, a dollar tanking equates to rand strengthening, which will wipe out hte meager gains in hte gold price. . .less by Jack on May 14 2009, 05:43 Find this comment inappropriate? Report it

Extremely Negative Fundamental for gold/silver Mr. Klapwijk, I believe your address was only half titled correctly. " Is it game over for gold/silver?" Your address should have been; " Is it game over for the markets and those who may have conspired to suppress gold/silver prices?" Neither . .more you nor the people who wrote your address have this power. Ultimately the people, the buyers are the decision makers. People, (buyers) can only be taken advantage of and lied to for a time and a time does not mean forever. Paper contracts, paper promises of gold/silver that does not exist. Personally, it isn't mine unless it's in my hands. Possession is 9/10 of the law. So if it's not in my possession, it's not mine...... Not rocket science.... Your answer was NO. You will not entertain a debate of a possible banking conspiracy that suppresses the price of gold.... Hmmmm. Does this only add water to concrete for a foundation of a possible conspiracy? Or did your "NO" answer the question????? . .less by Dal on May 24 2009, 23:03 Find this comment inappropriate? Report it

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