I wish I had an ounce of gold for every time somebody told me an ounce of gold was a dumb thing to buy.
I wish I had listened to Pierre Lassonde.
I first wrote about Lassonde in August 2003 when gold prices soared to a then-unthinkable $375 an ounce.
Lassonde told me he had 60 percent of his liquid assets invested in the precious metal and claimed it had nowhere to go but up. By up, he meant, $500, $1,000 and then maybe even $6,500 an ounce.
“One thing I know for sure is that gold is going to have three zeros after the first number,” he said. “I just don’t know how big that number is going to be.”
Some of my colleagues, sources and readers, scoffed as I touted this bold speculation.
Lassonde was then president of Denver-based Newmont Mining Corp., one of the world’s largest gold companies. He’d also written: “Gold Book: The Complete Investment Guide to Precious Metals.” So maybe he was just another gold bug talking up his business.
In 2005, when gold had safely crossed the $500 mark, as Lassonde predicted, I wrote about him again. And I still heard from naysayers.
“At these levels, I would call it fool’s gold,” said Jeff Thredgold, an economist with Zions Bancorp.
Thredgold, one of my long-trusted sources, even had gold in his name and he didn’t like gold.
This week, gold hit record highs again, nearing $1,100 an ounce.
The run-up came on news that India’s central bank bought 200 metric tons for $6.7 billion from the International Monetary Fund. China, flush with U.S. dollars, also has been stocking up on gold.
Lassonde, who is now chairman and the largest shareholder of a Toronto-based royalty company, Franco-Nevada Corp., says India’s move highlights a critical shift. This year is the first in decades when more gold will be purchased for financial reasons than for jewelry.
“The naysayers haven’t clued in,” Lassonde said Wednesday. “People are buying gold as a financial instrument. And they think it’s a better instrument than the U.S. dollar, or the euro, or the pound or any other currency.”
The IMF, as it sold the gold to India, warned of an asset bubble in everything from real estate to precious metals. All that money printed to shore up the banks is looking for something to buy.
“This is a hard-asset cycle,” said Lassonde, referring to commodities like oil and precious metals vs. financial assets. “The cycle still has five to 10 years to go. Don’t bet against the cycle.”
Central banks around the world are becoming net buyers, as opposed to net sellers, of gold, perhaps setting a new floor for gold prices in a once unthinkable range.
Gold could even triple from here. I know, I know. I sound like a gold bug. One of the things I hate about gold is the way it’s advertised on the radio and TV.
We’ve got Rush Limbaugh hawking gold for a firm called Lear Capital: “It’s never been worth zero.”
We’ve also got Watergate-goon-turned-talk-show-host G. Gordon Liddy touting gold for firm called Rosland Capital: “Buy your gold where I buy mine.”
But would you buy gold from a convicted burglar?
A bull market for gold has made Liddy, Limbaugh and other well-paid hucksters look smart. And now more mainstream investors are in on the party.
“People are coming to realize that gold isn’t the barbarous relic people thought it was,” Russell Ball, chief financial officer of Newmont, told me Wednesday. “With the collapse of Lehman Brothers we saw triple-A-rated debt become worthless over a very short time frame. Now we’re seeing high-net worth individuals put a significant portion of their portfolios into gold.”
Lassonde has been sharing his good fortune, giving away about $65 million over the years to the arts and education, and founding The Pierre Lassonde Entrepreneur Center at the University of Utah.
He has served as chairman of the World Gold Council and helped establish the exchange traded gold fund known as GLD, which I think is one of the easiest and cheapest ways for individuals to invest in gold. And I’m not getting paid to say that. (Sorry, Gordon and Rush).
So where does Lassonde think gold will go from here?
He believes it will settle when the Dow Jones industrial average and the price of gold are at a 1-to-1 ratio. It’s currently trading at roughly a 10-1 ratio. So how much will Dow fall vs. gold rise to meet this prophecy?
“That’s the unanswered question,” Lassonde said.
India’s recent move may be a sign of things to come. China will eventually tire of buying oh-so-many U.S. Treasuries and shift toward buying more gold.
“The Chinese have this incredible ability to turn things into mania,” Lassonde said. “If China develops a mania for gold we’ll see prices we cannot even imagine.”
Al Lewis: al.lewis@dowjones.com or 212-416-2617. Read Lewis’ blog at .
