Rick Rule believes gold may be “overpriced” as the yellow metal continues to trade above $1,800. After a prolonged move to the upside, like we’ve witnessed, a gold correction could be in the cards. On gold, Rule comments,
And that, “It wouldn’t surprise me to see gold go to $1,900, it wouldn’t surprise me to see it go to $1,650.”
Kitco begins the interview with questions about volatility and what Rule defines as a safe haven. Rick states,
“Volatility is a tool, not a risk.”
And that, he believes in the Warren Buffett maxim,
“You shouldn’t buy a stock if you don’t know enough about it that you wouldn’t be delighted to see it fall 30% in price, the month after you bought it, so you could buy much more, having expended the intellectual capital that caused you to buy it.”
On safe havens,
“I look at gold as volatility, but good liquidity.”
Rick clarifies,
“Gold is a safe haven asset. There will come a time when its price escalation, relative to competing assets, will make it less of a safe haven. Ironically, at that point in time, more people will regard it as a safe haven, because its price is gone up.”
And that,
“Cash is a safe haven. Although you are guaranteed, over time, to lose your purchasing power in cash.”
Junior Gold Stocks and Speculating
On speculating in junior gold stocks, Rule is quick to note,
“The key to a good speculation more than in any other kind of company is good management teams.”
He quotes Doug Casey, stating,
“We’re the prettiest mare at the slaughterhouse.”
And that,
“I believe that the ability to have cash, to take advantage of volatility, outweighs the disutility of the negative interest rates; the fact that you will lose purchasing power on your savings.”
U.S. Dollar is a Lie
Rule remembers speaking to a portfolio manager from a sovereign wealth fund some time ago, where he surmised that one might regard the U.S. Treasury and its underlying securities as a lie, given the ongoing money printing, etc.
Rule never forgot his response,
“What you say is true, of course, but it’s a deep and liquid lie, unlike all of the other lies we are told.”
Rule Warns a Gold Correction Could be Forthcoming
Finally, on Gold, Rick doesn’t write off a gold correction in the nearterm, telling investors,
“The value of Gold, relative to the U.S. dollar, I think in the next 2-3 years, can only go higher. Higher still, in most competing currencies.”
Although,
“In the near term, because its a measure of psychology, anything can happen.”
Gold continues to trade sideways as investors come to terms with gold’s higher value above $1,800 an ounce. There was no gold correction Friday as the metal inched higher and the HUI Gold Index was up 2.94% in late trading to 317.
Our ultimate guide to investing in gold stocks is a must-read resource to learn from data over the last several years and our tips and insights into reading potential investment opportunities in future.
