Introduction: Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, in October 2011 and serves as Marketing Director. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies. Andy's articles can be found on the Miles Franklin Blog, at www.milesfranklin.com.
Daily Bell: Hi, Andy. One reason for having you back at the beginning of the year is because gold is starting to do very well against fiat currencies. Or to put it another way, fiat is failing fast while gold retains its value. Can you summarize what's happened in the markets since the beginning of the year? Did you suspect that gold was on the launching pad relative to fiat last year?
Andy Hoffman: As a rule, I don't predict timing, as my Wall Street days are now 11 years behind me. Crazy, how time passes. No, my role as marketing director of a bullion dealer is simply to point out the fundamentals, of why gold and silver are the world's best long-term stores of value and "insurance policies" against the very things that are destroying the world today. That said, the "mosaic" of developments I watch has all but screamed that the "end game" has arrived for some time. And consequently, no one has been more vocal in his or her belief that the next major crisis – and precious metals explosion – had morphed from inevitable to imminent.
Daily Bell: Has gold bottomed against the dollar? Or more accurately, has the dollar stopped rising? Is the future down for the dollar against gold and why?
Andy Hoffman: Gold has not "done" anything except sit inertly, watching fiat currencies destroy themselves at its altar, one by one. Now that this has occurred, it will be the Fed seeking to "win" the final currency war, by accelerating its debauchery of the dollar – as evidenced by Janet Yellen, as I predicted she would, discussing the possibility of negative interest rates at her congressional presentation last week. Yes, it's safe to say gold has bottomed in U.S. dollars, although, as noted above, it bottomed against essentially all other currencies over the past 24 months.
Daily Bell: You believe there is price suppression and has been all along. Is that becoming ineffective? Last time you said price suppression would never cease.
Andy Hoffman: Yes, I said it would never cease. But I most certainly didn't say it would succeed. Which, given that prices have surged in nations where 90% of the world's population resides, is clear evidence that it is failing. And now that it's rising anew in dollars, the suppression is clearly dying.
Daily Bell: Is demand driving gold – and why not versus a few years ago?
Andy Hoffman: Global demand was at a record high in 2011, when U.S. dollar-based gold and silver prices last peaked. However, it is far higher today – which shows you just how suppressed paper prices have been and, subsequently, how much physical gold was covertly offloaded to hold paper prices down. Going forward, the global demand record set in 2015 will appear inconsequential compared to what's coming – at a time when supply is shrinking, and above-ground inventories bordering on non-existent, in terms of what's actually available for sale.
Daily Bell: Last interview you called what was going to happen to gold a perfect supply/demand storm heading our way. Can you elaborate, please?
Andy Hoffman: That's NOTHING compared to today. Global demand has gone parabolic, and both gold and silver production have peaked – care of the Cartel suppressing prices, and thus mining operations, for more than a decade. And again, by keeping paper prices so low, the available-for-sale inventories – from the COMEX, GLD, and LBMA, to name a few – have plummeted to the equivalent of "fumes."
Daily Bell: The action in metals buying continues to move east – to India and China. Why are Eastern consumers so much more savvy when it comes to precious metals?
Andy Hoffman: Simply because China has destroyed more fiat currencies than any in history – dating back 1,000 years. In a nutshell, easterners have a longer history – and thus, a deeply ingrained fear of – hyperinflation. They do NOT view yuan and rupees as money but instead, gold and silver. Here in the States, we have had – and abused – the "reserve currency" status for 70 years; so people have become accustomed to a "strong" currency, way above what it's worth. And boy, will that change soon – in a VERY big way!
Daily Bell: When it comes to central banks, there doesn't seem to be much of a regional distinction. Almost all central banks seem to be buying gold now. Why is that?
Andy Hoffman: Because they KNOW they are destroying their currencies, no matter how much they pretend otherwise. Like, for instance, the ultimate paradox of Mario Draghi saying he'd do "whatever it takes" to save the Euro when in essence his plan was to devalue it with NIRP and QE.
Daily Bell: Of course, Canada just sold half its gold – which was little more than a ton. That's ridiculous. Why would Canada's central bank choose to hold so little gold?
Andy Hoffman: Because they are STUPID! Canadian citizens will pay dearly for this callousness.
Daily Bell: Do you think if they need gold they have in mind to confiscate gold, as there is plenty of gold and silver in Canada in private hands?
Andy Hoffman: Good luck with that! First of all, how would they get it? The second they made such a crazy announcement, the loonie would collapse, and anyone owning gold would kill anyone trying to take it from them. Plus, there's really not that much in public hands – frankly, an inconsequential amount relative to the trillions of debt the government (all governments) have accumulated.
Daily Bell: And speaking about Canada, it seems like the miners are alive again. You don't like speculating about juniors but are they benefiting from the larger element of gold's new-found "vital spirits."
Andy Hoffman: I have spent four years not telling people to "sell," but warning them of how risky miners are – based on my history of owning them, working in the mining industry and being an expert in precious metals (and mining share) suppression. Today, they are getting a speculative bid from investor types, but the business risks remain – and will only increase as gold and silver are "remonetized" at the expense of fiat currency. You may well "hit the jackpot." But then again, you may well lose your shirt – as essentially all mining investors already have.
Daily Bell: Back to physical gold. How much physical gold do you think China actually holds? The claims are about 1,700 tons. We think they hold more.
Andy Hoffman: They only increased the (fraudulent) amount of their official reserves – last updated in 2009 at 1,054 tonnes – to roughly 1,700 tonnes (a number that has since risen each month) to get included in the IMF's inconsequential "strategic currency basket" – just before they devalued the yuan. However, they won't reveal their true level of gold reserves until there's no more left to buy. Simply based on a cursory analysis of available information about global gold flows – and Chinese production – I'd be shocked if they don't have at least 10,000-15,000 tonnes.
Daily Bell: And the US claims to hold 8,000-plus tons. We don't think the fed has physical possession of nearly that much.
Andy Hoffman: I don't believe they have ANY left. Again, simple analysis of global supply and demand nearly guarantees said 8,134 tonnes has been covertly dis-hoarded.
Daily Bell: Is there any gold left in Fort Knox? Do you have an informed opinion based on the people in the business that you speak to?
Andy Hoffman: No more informed than anyone else, since Ft. Knox hasn't been audited in 60 years – and never will, because the gold doesn't exist anymore. Even the Treasury's own accounting for said "gold reserves" suggests it's been leased, swapped, or otherwise compromised.
Daily Bell: Has Modi given up on his gold-suppression scheme in India? Can you remind our readers what he tried to do?
Andy Hoffman: LOL. Prime Minister Narendra Modi has proposed a scheme where gold-loving, rupee-hating Indians would "lend" their gold to the thieving Indian government indefinitely, in return for 2% dividends payable in rupees. To date, essentially ZERO gold has been "lent" – particularly in light of the printing press-destroyed rupee sitting at an all-time low as we speak.
Daily Bell: India may start mining significant gold now – perhaps Modi hopes that more gold will bring down the price relative to fiat currencies. But how is the supply demand curve for precious metals and for gold in particular? With prices going up are you seeing more mining generally?
Andy Hoffman: The global balance between gold supply and demand has never been tighter – as per what I noted above: The vast majority of official reserves have been covertly dis-hoarded to promulgate history's largest, most destructive fiat Ponzi scheme. Which, as we speak, is collapsing – yielding exploding gold demand, whilst supply plunges.
Daily Bell: Is there still a silver shortage?
Andy Hoffman: At Miles Franklin, one of America's largest bullion dealers, we had significant silver shortages in 2008, 2011, 2013 and 2015. And given that a new crisis is upon us – which, in my view, will be far worse than 2008 – I find it difficult to believe that 2016 won't see a shortage similar to 2008, when the entire global retail bullion industry ran out of silver (and gold) to sell.
Daily Bell: Will Janet Yellen's recent rate hike tend to blunt the dollar's fall against precious metals?
Andy Hoffman: The dollar has collapsed since the rate hike – as I expected it would, given that it signaled the end of the Fed's credibility.
Daily Bell: Will she be able to maintain a tighter dollar?
Andy Hoffman: Not due to her policy, but capital flight to the dollar's liquidity, from collapsing third world and emerging market nations – not to mention the breakup of the European Union and utter decimation of Japan. Either way, the dollar – and all fiat currencies – will accelerate their respective collapses against gold and silver.
Daily Bell: Will she go down in history as making one of the greatest blunders a Fed chairman ever made?
Andy Hoffman: This specific act will certainly make the record books for stupidest ever. However, if she instead lowered rates to negative territory – which, per her comments this week, she certainly will – the same net result would have occurred. Let's face it. She inherited the untenable situation left behind by Greenspan and Bernanke, so there wasn't much else she could have done – other than attempt to "kick the can" as far as possible.
Daily Bell: Are you expected more credit loosening around the world, including the US?
Andy Hoffman: That's an understatement. The "final currency war" I warned of three years ago has gone nuclear; and pretty soon all countries will have negative interest rates and QE – and "cashless societies," I might add, to confiscate as much wealth from the masses as possible.
Daily Bell: What about negative interest rates? If people are being paid to accept a loan, won't this have a dampening impact on people's interest in gold?
Andy Hoffman: This is exactly what I mean. Negative rates plus cashless society means stealing money from those – pardon my French – stupid enough to keep money in insolvent banks paying negative interest when, instead, they could own physical gold and silver, outside the banking system!
Daily Bell: Will any of these things save the central banking system or is doomed to fail universally sooner or later – and perhaps in the near term?
Andy Hoffman: All fiat currency regimes fail – and this one is in the final stage of collapse – per what you see in today's financial markets. And, oh yeah, essentially all currencies at or near – or in some cases way below – previous all-time lows.
Daily Bell: What about the wars around the world? Where do you see the Middle East headed – toward peace or continued war? What impact will that have on the interest in gold and silver?
Andy Hoffman: As I wrote in October 2014 – when oil was still $81/bbl – "crashing oil prices portend unspeakable horrors" and generally speaking, economic collapses of all kinds. Honestly, I'd be surprised if World War III doesn't arrive within a decade – and the fact that the Middle East is not only the world's biggest religious flash-point, but the focal point of the European migration crisis and collapsing oil prices, it doesn't surprise me how rapidly geopolitical tension in the region is escalating.
Daily Bell: Finally, should people even care about the price of gold? Don't you need to own it in a balanced portfolio no matter what?
Andy Hoffman: I don't believe in "diversification" of money. Gold is not a speculative asset, but real money – and care of Cartel suppression, has never been more undervalued, or scarce. Only you can know the right percentage for your "portfolio." But as for me, as relates to gold's role in my allocation of liquid assets, I cannot get enough!
Daily Bell: Even if gold is a terrible investment – in the sense that it is not a predictable speculation – isn't the reason to hold gold simply because we can't trust the management of fiat currencies?
Andy Hoffman: LOL. It has been the world's best investment throughout history! There are constantly short periods of government suppression to promulgate their doomed-for-failure fiat Ponzi schemes. But every time, over thousands of years, gold has survived and thrived where all others have failed.
Daily Bell: In a sense, gold is a proxy against the financial system, isn't it?
Andy Hoffman: YES! And what do you – the reader – think of the state of the global financial system? I mean, geez, the largest bank in Europe – Deutsche Bank – is on the verge of being the next Lehman Brothers. And trust me, dozens of others are in the same position – and will be found to be in such conditions shortly.
Daily Bell: Should you buy gold hoping to sell it – or hoping to retain it indefinitely?
Andy Hoffman: I plan to hold it until I find something worthy to sell it for. Which, in the monetary realm – amidst the collapse of history's largest, most destructive fiat Ponzi scheme – may not be for many, many years.
Daily Bell: Before you go, we wanted to ask you about two upcoming public presentations. Can you elaborate?
Andy Hoffman: Thanks for asking. Andy Schectman, Miles Franklin's president and co-founder, and I commenced a nationwide tour of FREE "Q&A Rap Sessions" last month, with our first such meeting, here in Denver/Boulder, drawing 130 people. Our next two are scheduled for Friday, February 26th in Miles Franklin's hometown of Minneapolis, and then Wednesday, March 16th in Phoenix. Additionally, I am about to book an April date in Florida. If you are interested in attending, here are links to the Minneapolis and Phoenix presentations. To RSVP, simply send me an email at email@example.com.
Daily Bell: Thanks for sitting down with us, Andy.
Andy Hoffman: You're very welcome!