I’ve managed to snare gold expert and Editor over at the Daily Reckoning, Shae Russell, to write to you today.
She’s spent the past year speaking to some of the biggest names in the gold industry.
It’s been a slog, but it’s resulted in one of the most in-depth investigations I’ve seen into the opportunity in gold.
Now, I’ll admit I’m not a big ‘gold bug’. But even I sat up and took notice at what she’s uncovered.
After all, if there’s money to be made — no matter where it is — I’m always interested!
So without further ado, I’ll pass you over to Shae for today’s essay.
It’s an interview she had recently with a true insider of the commodities scene…
Editor, Money Morning
A Bundle of Nerves
Most people think analysts are cool, calm, and collected.
That’s the impression people have, right?
We’re meant to be numbers people…looking for hard data to back up or challenge our investment ideas.
Well, most of the time, we are.
Except one morning back in late May this year.
That morning I was a bundle of nerves…
I even arrived at the office an hour earlier than normal…
As I mentioned yesterday, the idea for a new service was in the works. Interviews were being scheduled, flights were being booked, and filming equipment was being bought…
However, at the heart of this service was about how I can change the conversation around gold. Show people that it really is money — not just some shiny trinket your cranky old Pa likes.
The thing is, to teach people about gold and the role it plays in the monetary system, it means you have to talk to people that have been vocal supporters of it.
Which is why I reached out to speak with Rick Rule.
A global authority on gold…and he himself had spent many decades investing in commodities.
When it comes to companies hunting or digging up rocks, Rick knows what to look for.
I’d known of Rick for a long time, but this was my first chance to talk with him.
Yet as the clocked ticked over that morning, I was giddy with excitement.
And one step closer to interviewing the commodities legend himself…
Drinks with the legendary commodities investor himself
One of the first things you discover when you talk with Rick, is how knowledgeable he is.
The second thing? He is genuinely passionate about the commodities industry.
Furthermore, that one interview with Rick set off a chain of events that changed the course of 2019.
Shortly after we stopped recording, we swapped hot spot stories of exploration activity in Australia.
Then, he personally invited me to the Sprott Natural Resource Symposium as his guest.
Which as you’ll know from reading the Daily Reckoning Australia during July, the days were long, filled with incredible speakers, more interviews, and all often followed by exclusive end of day functions.
One night I’m on an official speaker cruise around the Vancouver harbour.
Another night was a private event for less than 100 hand-picked guests by Rick on the top floor of the Fairmont Hotel in Vancouver.
Private event with Rick Rule & Nomi Prins
Source: Fail Tail Media
Nonetheless, this conference created many more opportunities…and I’ll reveal exactly what opened up later in the week.
However, exactly what did Rick have to say about gold?
Surely everything about the yellow metal has been said?
In fact, what I liked most about my interview (and subsequent follow-up in person), is that he isn’t into conspiracy theories.
Facts are what drive his analysis, and shape what sort of mining companies he looks to invest in.
Gold will lose less badly to the US dollar.
Of course, I can’t reveal the whole interview to you. Both interviews will be available for subscribers only.
However, I can give you a sneak peek into his thoughts…
|Shae:||Now, first of all, what I want to do is I want to talk about your views on gold and how you see where gold fits with the US dollar. Is gold essentially challenging the validity of the US dollar at the moment?|
|Rick:||I think there was a point in time when gold did challenge the US dollar, likely before you were born in the 1970s — well within my memory span.
Looking back, in 1981, the market share of precious metals and precious metals securities in the US investment universe was around 8%, which is a different way of saying that gold’s market share was 8% of all investible assets in the United States.
Today, the same number is between one third of 1% and one half of 1%. The three-decade mean is about 1.5%.
I will argue, if given the chance, that over the next five years or so, while gold won’t recoup its former market share, it should, in my opinion, revert to the mean. If that happened, demand for gold in the largest investment marketplace in the world would quadruple or quintuple.
So, I’m not one that’s going to suggest that gold would win the war against the US dollar, but I believe it’s going to lose substantially less badly than it has in the last 10 or 15 years.
|Shae:||So, as you just pointed out then, in that argument, there’s been a massive reduction of people allocating precious metals to their investment portfolios. Why do you think that is?|
|Rick:||In my opinion, gold reacts to many stimuli, but the most important stimulus is confidence.
In particular, on a global basis, global confidence in the continuation of the purchasing power of the US dollar.
The US dollar is expressed probably best in the context of the US 10-year Treasury, which is institutionally the world’s benchmark security.
I would argue that people who are versed in arithmetic, rather than people who are versed in narrative, would suggest that investors today are confusing liquidity.
The fact that there’s lots of cash in the system worldwide with solvency. Our ability to service and repay the debts that we owe each other on an individual level, on a corporate level, but particularly on a governmental level.
I think people are conflating the fact that there’s lots of cash in the system with the fact that the debts that we owe each other are probably arithmetically unsustainable.
|Shae:||Given that the arithmetic favours gold, do you think there’s sort of been an active campaign to lead investors away from gold and into other supposedly more liquid assets? Encouraging people to get into the stock market and get into bonds or to move into cash?|
|Rick:||I’m not one of these who believes in ongoing thorough conspiracies.|
|Rick:||Certainly, all markets are manipulated.
If big financial interests, as an example, can manipulate a market as large as the labour market, they can easily have their way with gold, where the paper trades can exceed the physical trades by 500 times, not percent.
Certainly, you see circumstances where, at periods of the day when the trading volume is the weakest, people sell immense amounts of gold.
Obviously, that’s not the action of a profit-seeking trader with a gold position.
It’s somebody that’s trying to influence a physical position with a paper position. Obviously, it’s manipulation.
Now, the idea that the biggest banks in the world, the US government and all these people had a 30-year conspiracy to depress the price of gold, I mean, on the face of it it’s silly.
These are the guys who can’t deliver the mail, can’t educate the kids, lost the war on poverty, lost the war on drugs, lost the war in Vietnam.
We’ve got nothing to fear from them. The truth is that gold has traded inversely to confidence and we’re in an extremely confident period.
There was no need to manipulate the gold price relative to the US dollar because the US dollar was kicking the stuffing out of gold.
I think that’s about to change.
Keep an eye on Aussie miners
You can feel it, can’t you?
Right after that we delved into something much deeper…
In fact, after that last question wrapped up, we went straight into how the markets are responding to the gold mining merger activity.
Furthermore, Rick then showed how knowledgeable he is on the Australian mining industry. He named-dropped exploration spots like they were in his own backyard.
We spent the rest of our first interview going through what makes a strong gold miner, and who’s doing it the best at the moment (here’s a hint: Rick is impressed with how the majority of Aussie mining companies are managing things).
Of course, we looked at how a weakening Aussie dollar is a blessing for Aussie miners and explorers…and rounding that out, we covered corporate board management, mining in hostile countries, and where the next multibillion-dollar gold deposits would be found.
But that’s just for subscribers.
Until next time,