On behalf of Matterhorn Asset MGMT Lars Schall talked with Stewart Thomson of Graceland Updates. Thomson thinks gold will take on more of a role in the future as a base currency in commodity trading accounts. Moreover, he says the Western banking system won’t be very relevant to gold in the coming decades.
By Lars Schall
The following interview was conducted and originally published by GoldSwitzerland in Zurich here.
Stewart Thomson is the president of Graceland Investment Management Ltd. and owner of GU Trader, which is a gold futures/ETF trading service. High net worth individuals around the world follow his newsletter Graceland Updates on a daily basis, which features his technical analysis of gold and precious metals, energy and more. He developed the “PGEN”, which is a unique capital allocation program. It is designed to allow investors of any size to mimic the action of the banks. Thomson is a retired Merrill Lynch broker.
LS: Stewart, is gold in your view the world’s lowest risk investment?
ST: In my opinion, gold is not the world’s lowest risk investment. That title must go to food, because people will stop buying gold before they stop eating, but gold is a close second to food, in terms of the risk of going to a price of zero. Gold is one of the lowest risk investments, and it is the ULTIMATE asset, because it has a risk profile almost as low as food, but it is a cultural and religious item for billions of people. Also, it is money. It is portable, and it’s art itself. Simply put, Queen Gold is the ultimate asset and there are no contenders to her throne. Nothing compares to gold, nothing at all. For all of these reasons, gold is the world’s only ultimate asset.
LS: Do you believe the banking system will or has to accept gold ultimately as a zero-risk asset?
ST: The Indian banking system already does, for all practical intents and purposes, and offers substantial interest on it, and loans against it. I don’t think the Western banking system will be very relevant to gold in the coming decades, so whether they embrace it or not is largely irrelevant, in gold’s biggest and most bullish picture.
LS: Is gold a commodity, a currency, or both? And do you think the stock-flow ratio distinguishes gold from all other commodities?
ST: Gold is commodity, a currency, and it’s art.
LS: Why do you focus on gold at all?
ST: I focus on anything that is ultimate.
LS: Do you think that gold will get a prime role in years to come in international finance and trade? For example, as in “gold for oil” – hard asset for hard asset?
ST: As Asian paper markets develop, gold will take on more of a role as a base currency in commodity trading accounts.
LS: What would you say people should pay attention to in the future in order to find out if gold is in a bubble?
ST: Gold bubbles ended when western relevance to gold officially ended. That ending commenced on April 13, 2013. The end is a process, not an event. I don’t expect to see another gold bubble like the 1980 bubble for at least 50 years, and probably a century.
LS: What do you think drives the Chinese appetite for physical gold?
ST: Culture. Buddhism, mainly, but culture in many forms like celebrating birthdays, etc.
LS: Will silver outperform gold in the long run?
ST: That doesn’t matter. Silver investors need to focus on this mighty asset as “gold’s little brother”. When gold declines to key HSR lines (HSR being: horizontal support and resistance), silver investors need to buy silver there. Silver is a phenomenal asset, but it doesn’t exist to compete with gold. Most silver investors see silver as the poor man’s gold. That’s wrong. The poorest Indian’s buy small amounts of gold first, and silver as a 2nd choice, when more funds are available. Silver is not poor man’s gold. It’s Queen Gold’s little brother, and it’s an ultimate asset, like gold is.
LS: What do you foresee as the endgame of the financial crisis?
ST: I see it ending like the rotary phone or the model t, rather than like the burning of Rome. The dollar fades away into a global currency over a period of decades, where crypto currency, not gold, plays a role. Gold seems destined to move back into the hands of its rightful owners, which are citizen hands, not government or bank hands.