RT: Markets are falling, gold is up, markets are rising gold is still up. What is going on?
TM: “I think the key thing you have to remember is that gold really is an absolute store of wealth. Obviously when you look on the screen you see nominal prices, nominal prices are what we pay on an everyday basis for tomatoes for apples or for gold. So the nominal price of gold is going up. The real issue is if you want to preserve the purchasing power of your money today, and you want to make sure that that purchasing power you have five years out or ten years out or whatever, you want to find an absolute store of wealth. That is the traditional function of gold. What we are seeing right now is that gold is telling the world that the value of the dollar is falling.”
RT: So does that mean gold will only continue growing?
TM: “I think we have to understand too that people have expectations and sometimes in a bull market they get a little bit out of whack. I mean nothing goes up, all the time, every day, you know, the way gold has been going up all the time. Of course there will be corrections, of course there will be bumps, and chops in this. But what I think has happened is that because of the amount of liquidity that been pumped into the global market particularly in the United States, there is really no reason to suggest that gold prices are going to go down substantially for a long period of time.”
RT: Take a look at investors sitting on the sidelines right now thinking whether to come in and buy at this price. What do they do? Do they actually buy?
TM: “I think the key thing in this is to ask themselves ‘why am I buying gold? Am I just trying to ride the wave?’ in which case buying gold is the same as buying any other security or stock or anything like that. If you are buying gold because you are concerned that your savings in nominal form, which would be your savings account or maybe treasury bonds or something like that. If you are concerned those savings are not going to have the same purchasing power now in the future, then yes, you should buy gold. If you are just trying to ride the gold wave, then frankly you can buy anything at this point – Google or Amazon or an oil company.”
RT: But you don’t see any risk of a bubble?
TM: “If you think about it, if you take the past hundred years or so, the traditional weighting for someone’s portfolio for gold globally, was anywhere from 3-5%. Right now we are below 1%, so clearly there is huge room for gold to go back to the mean, if you will, to basically go back to the traditional role of being an insurance element in investor portfolios. Right now, despite the moves in gold, really the world is not over invested in gold by any means.”
RT:Well in Russia it seems that companies like Polyus Gold are really enjoying this run. Obviously they are the biggest gold producer, and it has been reporting that output grew in the first quarter by 60% on average. How did that happen?
TM: “Well Polyus Gold has their core project and then other projects around it in the Krasnoyarsk region in Siberia. They have had some problems with it last year particularly using some very hi-tech technology in terms of using living organisms to process gold. They had some problems with that last year, and clearly they have been able to get that back on track. And also you have to remember that Polyus Gold has had very little growth in production over many years, so they were due for a bump in production.”
RT: So do you think gold will always maintain its safe haven status?
TM: “Well again, that’s a pretty bold statement. The idea is that on any day to day basis, no I can’t make that guarantee. But if you are taking a little bit longer term view, then yeah, gold has traditionally performed as a source of wealth protection.”
RT:Are gold stocks a good idea?
TM: “Gold stocks are a leveraged play on gold. Basically traditional leverage on gold. What you are basically betting on right now if you are going into the gold mining sector in equities, what you are betting on is that the costs of mining gold rise slower than the actual price of gold that you sell. So you are going to see margin expansion. And that’s essentially what is happening: gold is going up faster than oil for example, which is a key component for mining costs.”