Franco-Nevada Chair: Gold in a bull market, see gold at $8,000
Legendary gold investor Pierre Lassonde says gold prices are heading higher, much higher.
“The five-year bear market for gold is over and we are at the beginning of a new bull market,” he told BNN.
During strong gold bull markets, the price of gold often hits a one-to-one ratio with the Dow Jones industrial average, says the chairman of Franco-Nevada Mining (FNV.TO) and former president of Newmont Mining (NEM.N 2.03%).
That means gold could surge to US$8,000 an ounce or even higher, he says.
“In 1980 gold was at US$800 and the Dow was at 800; in 1934 gold was US$36 and the Dow was at 37 – where is the Dow today?” he asks BNN’s Catherine Murray. “Do I know it’s going to go back to 1:1 – I don’t know… even if it gets to 2:1, that’s US$8,000 – I’m slightly optimistic.”
Gold prices have rallied almost 20 percent in 2016 to now trade just above US$1,260 per ounce. And while gold stocks have rallied as well, many continue to trade a bargain prices, Lassonde said.
“I’ve been saying for the past six months now is a good time to buy gold,” he added. “You have to buy (gold stocks) when you hate them and sell them when you love them.”
The rally in gold has come as global financial markets experience wild swings this year. Investors traditionally turn to gold during times of trouble. In February, investors were buying as much gold as they were during the financial crisis.
Another factor pushing gold higher is fear of negative interest rates, says Lassonde. Under negative interest rate policies people are charged on their deposits with banks, and banks are charged for their deposits with the central bank. That has helped to push bond yields lower, and made gold more attractive, he says.
“One of the big knocks on gold is that you have to pay to hold it,” Lassonde said. “Now even bonds have a negative carry.”
While gold is starting to shine, Lassonde is less optimistic about other commodities.
“Copper, iron ore or oil and gas… it’s going to take quite a while for those commodities to work out the excess capacity that has been created.