Q: BMG’s products include mutual funds that purchase bullion, as well as an actual direct-ownership bullion bar program. Can you explain the differences between owning physical gold and owning a gold fund, and how investors can choose the right option?
A: I originally set (the mutual funds) up so they qualified for registered retirement plans in Canada, and we’re now working with a company to work it into U.S. IRAs and so on. But the funds are for smaller investors — the minimum subscription is $1,000, so that pretty much covers everyone. The fund itself buys physical bullion. We don’t market-time, we don’t hedge … it’s a pure bullion holding.
But once you have high-net-worth investors … we provide allocated storage for the bigger investment-grade bars. And when you get to that, you have 400-ounce gold bars worth $600,000.
Q: Do you think gold miners are a good investment right now?
That’s more of a speculation. The problem: The gold miners haven’t been keeping pace with even bullion. Because the gold miners as a whole are a relatively thin market — I think for all of the miners, the (combined) market cap is less than a Microsoft (NASDAQ:MSFT) or a Google (NASDAQ:GOOG) — the problem is if you have a broad market decline, mining stocks will have a much bigger decline, even if the price of gold is rising. Under certain circumstances they might outperform, but the investor has to understand the difference.
Q: What about other precious metals, such as silver and platinum?
That’s why we set up the original fund with gold, silver and platinum, because then you have diversification in all three metals, and each of the metals has its own bullish story to tell. Platinum, for instance, is geographically dependent on South Africa. South Africa has 80% of reserves and production, so if there’s any sort of glitch in South Africa, prices rise regardless of what else may or may not be happening.
Q: What do you consider the greatest threat to an eventual explosion in gold?
Ron Paul getting elected and getting things right. *laughing* That’s the greatest threat. Because then the erosion of the currency, by getting into fiscal responsibility, may improve.
I think at some point we’re going to have a massive short-covering rally which is going to cause a spike, and when that short covering is over there’s going to be a decline, and people will think that the bull market in gold is over. No — it was just (lower) after the short-covering correction, and then it’ll go back to normal.
The thing to look at is the strength of the currencies — has anything really changed? Have the governments of the world gotten fiscally responsible? Then there’ll be less need for gold. But the way things are going, it doesn’t look like it’s going to happen.