Frank Giustra, the Goldcorp founder who helped build one of the world’s largest gold companies when the metal traded under $300, sat down with Kitco News at the New Orleans Investment Conference and laid out a simple test for abandoning his position. Give me world peace, honest politicians, and benevolent bankers, he said. If you can give me all three of those things, I will walk away from gold. He is not expecting any of them.
With more than 45 years in the business and a longtime role on the International Crisis Group, Giustra warned that dozens of black swans are lurking in the shadows just waiting to come out. When one appears, he expects policymakers to reach for easy money again. I absolutely guarantee you’ll see a lot of QE in our lifetimes, he stated.
The nearest risk in his view is Iran. With Brent crude already above $110 the morning of the interview, Giustra said markets were pricing peace too early and placed himself in the camp that believes the United States may strike after the midterms. If that happens, he expects Iran to hit back across the region. Oil could potentially go a lot higher if there’s a second or third strike, he said, and we could force the global economy into a deep recession or a depression if this gets out of hand. He described the overall U.S. strategy as wrong from the start while noting that quiet diplomacy continues behind the scenes. Listen, I hope I’m wrong. I really hope I’m wrong, he added.
Giustra tied the long term case for gold directly to the cost of war and currency debasement. He pointed to the post 9/11 conflicts that he said probably cost $8 trillion. You slowly bankrupt the nation. You have to debase your currency in order to stay in the game, he explained. You debase the dollar, gold goes up. It’s that simple. That’s math. That’s not a theory. Central banks are slowly de dollarizing and replacing with gold, he said, creating a floor under the price that will not disappear. If you buy physical gold, you buy it to hold it. Gold preserves generational wealth. That’s what it does. Always has, always will.
He also noted the absence of retail mania. I don’t see any Lamborghinis parked in the driveway, he observed. We’re not in the traditional bull market because the public at large has not bought into it yet. Higher diesel costs are squeezing miners, yet Giustra remains a holder of names such as Agnico Eagle because he believes gold is not going down by much.
He expects majors flush with cash will eventually have no choice but to buy juniors to replace reserves, especially in copper where he sees a very large supply deficit.
The message was clear: the structural buyers have not flinched, the black swans remain, and the case for holding gold is unchanged.
