Eric Sprott Ruskie

UFC Capital

Yesterday, we published an article about how the IMF wouldn't sell investor Eric Sprott any of the remaining 191.3 tonnes of gold it had left.

We spoke with Alistair Thomson of the IMF and he clearly explained his reasonings behind not being able to sell Mr. Sprott gold.

Among them:

  • The IMF only goes through a specific broker.
  • It only sells gold to sovereigns.
  • Thus, Sprott's desire to purchase IMF gold did not comply with 'protocol'.

Of course we want to hear all sides of the story, so today we spoke with Mr. Eric Sprott himself on the matter.

Sprott says that around six weeks ago while in the process of selling the gold trust ETF, he approached the IMF about buying some of the gold they were selling. And why not? If there's a buyer and seller, it's a market. Sprott originally wanted to buy only a portion of the available gold for sale but later decided it'd be interesting to see what the IMF would do or say if he tried to buy the whole lot of it.

Says Sprott, "I was prepared to get the bazooka."

But ultimately, there was no way the IMF was going to deal with Mr. Sprott's interests. If the IMF wants to sell gold, then it should clearly explain on what terms without making vague references like "phasing out" sales over time. Phase out could mean anything to 2 tonnes per month to 50 tonnes per year. It's unclear and that creates distortion in the investment world.

On the state of the gold market, Sprott says the following:

"I'm a 100% believer that central banks have suppressed the price of gold. I find it hilarious today that they have these programs to sell gold - it's of no use. It's one of the dumbest decisions in the last decade."

He wonders why the IMF is even selling gold. Gold is tangible and will always have value whereas money is just paper and at this point, digits on a screen. The IMF is going to spend the next few years bailing out nation after nation (PIIGS, anyone?), so why is it even selling gold?

Turning attention to Sprott's gold trust ETF (PHYS), he tells us that unlike State Street's SPDR gold ETF (GLD), the gold in his trust is readily available for physical settlement*. As for insurance:  "All physical gold is held at the Royal Canadian Mint which has its own insurance procedures." Sounds good to us, unless of course another Die Hard With A Vengeance scenario goes down.

On a lark, we asked Sprott his views on the so-called "Plunge-Protection Team" or the Working Group On Financial Markets.

His response was quite intriguing:

"The Fed bought $1.7 trillion in bonds in the bond market. Who knows how much they've put into equities? Look at March 9th. The PPT came into the market in the 1987 crash. When things are unstable, the PPT steps in."

And there you have it.