That eye-popping term serves as both a price target and an upcoming book title for Bullion Management Group president and CEO Nick Barisheff, who talked to InvestorPlace early last year about his lofty expectations for the yellow metal.
Since that time, gold has embarked on a precipitous decline, from $1,653 then to below $1,400, thanks in part to the sledgehammering of the past few trading days.
So we talked to Barisheff again to see whether much has changed his opinion in the interim. The opposite is true: He’s as convinced now as he was then that his high-water mark will stand, and that the same pressures he cited before — primarily concern about governments’ fiscal management — are in place and eventually will propel gold higher.
Here’s what he had to say about the recent action in gold, as well as its future prospects:
Q: Did any of the points central to your thesis last year fall apart, or has gold’s decline come amid other influences?
A: Not only do they hold, but they’re getting more pronounced — unless I missed the announcement that Republicans and Democrats have all kissed and made up, and the U.S. deficit and debt problems are solved, and the 47 million people on food stamps are back at work.
Obviously, none of that has happened. The debt is growing, they’ve kicked the can down the road about the debt ceiling. So the primary factor is simply that gold has been rising because currencies are being devalued. Whether it’s the U.S., or Japan, which has jumped into the fray saying they’ll double their monetary base and the yen is going to decline. And other countries are going to have to react accordingly in the race to debase.
Then there’s the issues of the retiring baby boomers. We’re going to have a major economic shift. During the ‘80s and ‘90s, baby boomers were driving the markets … but as you get closer to retirement, you don’t need to buy any more stuff, and instead of investing, you’re starting to liquidate your investments. Spending is slowing down, Medicare bills are rising. So you’re highlighting more and more government expenditures to support the retired baby boomers, with less and less tax revenues.
And the last thing is the issue of peak conventional oil, notwithstanding the discoveries in shale. But the production of shale is slow, expensive and environmentally unfriendly — so we might have tons of reserves, but it’s not something you can necessarily have come out of the ground as fast and as cheaply as conventional oil. So as availability drops, price will go up. Other than printing money, the price of oil is the only other thing that causes inflation across the board since we use oil for everything.
Q: So what has been pressing on gold prices?
A: Consider on Friday, there’s various estimates as to whether the total sale of Comex futures was 400 or 500 tonnes, the ballpark figure was $24 billion. When you do that, you start triggering sell-stops, and when that momentum picks up, the next stage is margin calls, and those happened Monday. And then everyone’s forced to liquidate. So this is an entirely paper issue. People aren’t running to the coin store to sell their physical bullion, but to buy. You can call it orchestrated, manipulated and so on, but it’s certainly not a “normal” event. What happened Friday was suspicious. People just don’t dump that much — that would be like, you wake up Friday morning and the Dow goes down 1,400 points.
Q: Who would’ve been selling?
A: The only possibility is the Federal Reserve through various commodities brokers. The other central banks across the rest of the world are buying gold. This is giving an enormous gift to China, who will be buying with both hands.
Q: Why would the U.S. sell off such a large position in gold?
A: When you have gold going up, it’s a non-confidence vote in the currency. People no longer trust the currency. They want out, and into gold. China has … I’m losing count, because it’s well over a dozen trade deals with different countries, from Brazil to Russia to Saudi Arabia to Japan to Korea to France to Australia, where they’re settling differences in their respective currencies and bypassing the U.S. dollar entirely.
Q: Some say the recent selloff in gold and other commodities is a sign of deflation. What are your thoughts there?
A: Gold is not a commodity. It’s money. If you don’t believe me, go to the Canadian government financial statements, the U.S. government financial statements, and when you look through the footnotes and it says monetary assets, there are two things — currency and gold. Gold is not lead and zinc and copper.