Pierre Lassonde has said gold could skyrocket to ,000 to ,000 an ounce as the Dow-to-gold ratio falls to 1-to-1. Has his view changed?Lassonde is the founder of Franco-Nevada Mining Corporation. He recently sat down with Daniela Cambone to talk about the state of the gold market. He said not only can he still see a path to ,000 gold, he now sees the catalyst that could take bring the price of gold into parity with the Dow — massive government debt in response to COVID-19. During the interview, he also talked about the current drop in the gold price and why he thinks this is a short-term trend.[embedded content]One of the biggest drivers for gold this year has been the inflow of metal into gold-backed ETFs. Through October, total inflows for 2020 were at a single-year record of
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Pierre Lassonde has said gold could skyrocket to $15,000 to $20,000 an ounce as the Dow-to-gold ratio falls to 1-to-1. Has his view changed?
Lassonde is the founder of Franco-
One of the biggest drivers for gold this year has been the inflow of metal into gold-backed ETFs. Through October, total inflows for 2020 were at a single-year record of 1,022 tons. But the flow of gold into gold-backed funds has fallen off in the last month or so.
It was bound at one point to stop. It’s the largest inflow ever in the gold ETF, and for sure it was caused by all of the deficits that we’re seeing around the world and the fear of the monetization of the debt. So, it’s taking a breather.”
Lassonde pointed out that the pandemic has crushed the jewelry sector, and demand is down significantly in Chiana and India, the two biggest gold buyers in the world. Even so, we still saw record gold prices earlier this year.
I’ve been telling people, expect a lot of volatility in the fall, around the election, around the uncertainty of what the new administration is going to do, around the uncertainty of any further fiscal and financial packages. And until, I think, the new administration comes in and we have a bit more certainty, I think you’re going to still see a lot, alot, of volatility.”
But Lassonde said fundamentally, nothing has changed today from a month or two months ago.
If you look at the world economies, in fact, it’s getting worse. You look at the pandemic in the United States, it will peak, more than likely, around Christmas. … The economy in the first half of 2021 is going to be decimated.”
And how will governments around the world respond? With fiscal packages in the trillions of dollars.
Nothing has changed. We are in a waiting period until the Biden administration comes in. And are we going to see a $2 trillion package? A $3 trillion package? Or even more? Because I think it’s going to take probably more. And we’re going to see a lot of bankruptcies coming in. So, to my mind, nothing has changed. And the gold equities are always kind of like forward-looking. So, the gold equities are down like 20 to 25 percent from their top. They were signaling that the gold price was going to come down. That’s what’s happening. And what you’re going to see is the gold equities are going to find a floor, probably very soon, which will signify the gold price has reached the bottom. And by January I think we’re going to see new highs.”
Lassonde said there is too much money flowing out there and too much hope.
People are looking over the valley. We were looking at the next mountain, but they always forget that first you have to go through that valley. And that valley is coming.”
Lassonde is also bullish on gold mining stocks. He poinited out that at the current price, mining companies are enjoying their fattest margins ever.
In the past, Lassonde has projected $15,000 to $20,000 gold with a Dow Jones to gold ratio of 1-1. Has his view on this changed?
And he now sees the catylist that could drive gold to parity with the Dow – the response ot the COVID-19 pandemic.
It’s the worldwide response of government and the amount of debt that they’ve taken on in response to COVID and the amount of debt that is being essentially monetized is what’s going to cause the ratio to go to 1-1.”
Lassonde said COVID has compressed the timeline from years to months for the adoption of a lot things such as work from home and certain technologies. It’s done the same to economic trends.
If you look at government debt, for example, we were on a long-trend basis of more and more government debt. All of a sudden, COVID happens and what would have taken 10 years to issue $3 trillion of $5 trillion of debt all happened in one year. And this is essentially the root cause of the gold price going higher — is the US dollar is going to go lower because they’re going to issue tons and tons of money.”