Al Jazeera released a TV interview with Nick Barisheff, CEO of Toronto based Bullion Management Group and author of the book “$10,000 – Why gold’s inevitable rise is the investor’s safe haven” Bullion Management Group has close to 0.5 billion of dollars worth of assets. Barisheff explains why he thinks gold could go to $10,000 in this decade and what the real value is of gold.
Coincidence or not, the video is not accessible in the US (some sources report it is blocked on Youtube). That is why we are providing the transcript in this article of the most important elements of the interview.
Gold is not paying any dividend or interest so what is the usefulness as an investment?
Most people that really understand gold do not want to get it out of the vault in return for dividends or interests. The same would apply to physical dollars or euros in a vault; those currencies do not pay dividends. In order to get a dividend or interest, one should put its wealth at risk of not getting it back.
Is gold a commodity or a monetary asset?
There is a lot of confusion about precious metals being a commodity or a monetary asset. Gold, silver and platinum have been money for over 3,000 years. The financial statement of Western nations under their balance sheet shows monetary assets as a subcategory. That subcategory has only two items: foreign currency reserves and gold. There has not been any single fiat currency throughout history that has not ended in a hyperinflation and a complete collapse. Today, we have a different set of circumstances in that we have a global fiat currency system. It is starting to become exponential in terms of amounts of currency in circulation and amounts of new currency created. The ratio has always been in tact between total debt and the gold price.
Gold’s outlook: $10,000 gold or the inflation adjusted $720 per ounce?
If the gold price falls below the production cost ($1,200), gold exploration is done and demand totally overwhelms supply. Besides, as the gold price rises, some commodity based demand may drop but monetary demand goes up. In the new Shanghai futures exchange, the amount of gold deliveries per month is almost equivalent to total global mine supply. So it is the monetary aspect that is overwhelming; it is not the commodity aspect that makes the difference.
From a point of view of inflation, the accurate way to look at it is the wealth preservation aspects of gold. If we look at how many ounces of gold it took to buy a car in 1971, when it was depegged from the dollar, it was 66 ounces. Today it is ten. A house with 703 ounces 228. The Dow 25 today is 8. The only thing that held its value is oil: you would 12 barrels of oil for one ounce of gold in 1971, you get 12 barrels of oil today, even if the price has gone from 12 to 107. That is the true measure of wealth preserving aspects of gold.
Does the world need currencies linked to commodities?
As humans, we have not come up with the perfect system of money. In all religions, there is consistency that gold and silver are the only forms of honest money. The US Constitution says the same thing. It had its flaws but right now the problem is the ability of the central banks to print unlimited quantities of currency. In such a situation, they inevitable overprint. Once you get to the exponential curve, you get into hyperinflation. It always happened this way in the past, I believe it is where are going in the future.
Nick Barisheff was several times a guest on GoldSilverWorlds. Some excellent readings which fall in the “must read” category:
The Destruction Of Currency And Rise Of Gold
Why Mainstream Media, Main Street And Institutions Fail To See The Benefits Of Gold
Cyprus and Gold – Lighting a Candle in a Dark Room.