Interview With James Rickards: Gold Set for Massive Rally

The author of the best-selling book ‘Currency Wars’ talks about his new book and why gold will rally in 2014

    James Rickards, author of the national bestseller "Currency Wars." (Courtesy of James Rickards)

    Epoch Times: Mr. Rickards, please tell us about your new book, “The Death of Money,” coming out in April. 

    James Rickards: It’s both a prequel and a sequel to “Currency Wars,” my first book. It’s a prequel in a sense that “Currency Wars” opened with two chapters that describe a financial war game that took place in a top-secret weapons laboratory in 2009.

    That was the first time the Pentagon had ever done a war game where the only weapons could be financial instruments—stocks, bonds, derivatives, currencies.

    How did I get involved in it? I start out talking about earlier involvement in national security matters and that led up to the war game. That part is the prequel. 

    The sequel is that in “Currency Wars” I also had a lot of history. There were five chapters of history and I thought that was very important. 

    If you are going to talk about gold with the reader, a lot of times if you jump right into gold, people think you are sort of a nut. I find if you tell the story through history people can see gold in a context, and when you talk about it, it doesn’t seem quite so strange.

    In my new book, “The Death of Money,” there is no reason to repeat the history—that’s all in “Currency Wars”—so it’s more forward leaning, and talks more about the future of the international monetary system, a coming collapse. 

    And not just a collapse, because a lot of people are running around talking doom and gloom, the end of the dollar and all that. I might even agree with that, but I don’t think it has a lot of content. 

    What I try to do is provide a more in-depth analysis describing what will come next, what the future international monetary system will look like. 

    I point out that the international monetary system has already collapsed three times within the last 100 years—1914, 1939, and 1971—and that another collapse would not be at all unusual. But it’s not the end of the world. It’s just that the major powers sit down and reform the system. I talk about what that reformation will look like. 

    So that’s the sequel or the continuation of the story looking over the horizon. Some stuff that is before “Currency Wars” and some stuff that is after. And other content on the contemporary situation in Europe and China, so I hope people enjoy it.

    Epoch Times: What about gold?
    Mr. Rickards: Gold has a number of vectors. It is technically set up for a massive rally. Let me separate the fundamentals from the technicals. 

    Fundamentally my target price for gold is in the range of $7,000 to $9,000 per ounce. That’s not something that will happen straight away, but it’s not a 10-year forecast either. It’s a three- to five-year forecast, for the price to rise by about five to six times.

    Epoch Times: What is the analysis based on?
    Mr. Rickards: It’s based on a collapse of confidence in the dollar and other forms of paper money. To restore confidence you have two means: You either flood the world with liquidity from the International Monetary Fund in the form of Special Drawing Rights [SDRs, a form of money issued by the IMF], or we return to a gold standard. 

    The flooding of the market with SDRs would be highly inflationary, so that by itself would drive gold to a higher level. If they go back to a gold standard they will have to take a non-deflationary price. 

    People say there is not enough gold in the world. The answer is there is always enough gold in the world. It’s just a question of the price. Now, at $1,300 an ounce, there is not enough gold to support world trade and finance. But at $10,000 per ounce, there is enough gold. It’s not about gold, it’s about the price.

    If you go back to a gold standard you have to avoid the blunder that England made in 1925, by going back to the gold standard at the wrong price, which proved to be highly deflationary, and contributed to the Great Depression. 

    I’ve done the math on that and the non-deflationary price for a gold standard today is about $9,000 per ounce.

    Epoch Times: What is your target price based on?
    Mr. Rickards: It’s based on supporting the paper money supply with gold. That would be using M1 [paper notes, coins, and checking accounts] as the monetary base, with a 40 percent backing. If you were to use M2 [M1 plus savings accounts and money market funds] with a 100 percent backing, that would be $40,000 per ounce.

    Epoch Times: Gold investors would make a killing!
    Mr. Rickards: It wouldn’t mean gold would be worth any more [in real terms]; it would just mean the dollar has collapsed. But yes, you get more dollars for the ounce. Let’s call that the three- to five-year forecast. 

    For the year ahead, those fundamentals are unlikely to play out in a year. But the technicals can play out. Technically, gold is set up for a major rally based on the decline in floating supply.

    Epoch Times: Does that have to do with the gold crash last year?




    • Robert

      Did anyone try calling the GLD hotline at 866-320-4053 and asking for any numerical details on GLD’s insurance? I reached a State Street representative that told me to look at the prospectus but I am sure the prospectus doesn’t give any numbers or percentages to how much of GLD’s physical gold is insured.

      The prospectus only vaguely mentions HSBC holding some kind of insurance policy for GLD. This State Street representative proceeded to feign ignorance when informed of this and said they were just the “marketing agent” for GLD. What kind of marketing agent doesn’t know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.

      There are not many ways for the average investor to verify GLD’s physical assets since most retail investors won’t even have the right to redeem their shares for physical bullions. The prospectus is full of legal writing protecting GLD organizations from any liabilities but not a single clause to protect investors from bullion lending.

      On top of everything, the GLD manager – State Street, has been shown to be less than trustworthy (Carina CDO, multiple instances of forex fraud). Where is the credibility in GLD?

      • majorx

        In your opinion is Rickards right? Paper assets like GLD will collapse in value as the price of Gold skyrockets? Should we only own physical Gold?

        • retired_sandman

          Comex paper assets are covered only 1:100 at present by the physical asset. That one is an accident waiting to happen.

        • old_frt

          To answer your question In one word: yes.

      • retired_sandman

        Doesn’t really matter. You’d have to be really light in the brain-pan to put one thin dime in GLD. Stick to physical and keep it under direct physical control (not in the banking system). That’s the ticket.

    • Slvrizgold

      Silver at $20. Dirt cheap. If you think gold is going to $7000 or higher consider owning some silver too. Then, when the silver:gold ratio goes to 15:1 area where it belongs historically you’ll outperform gold by factor of 4. I think Rickards will be wrong when he states that gold won’t go up in real terms. It’s going up in real terms for over 10 years now. If you bought gold at $400, that’s a triple, but asset prices or consumer prices are not up triple (not in usd terms yet anyway.) The PM bull has many years to go. The Ponzi will continue longer, and the pressures will build. Then everyone will realize the Minsky moment is in the rear view mirror. Gresham’s Law is in effect right now though. I think what Rickards means about not going up in real terms concerns long periods of time. When it starts going up parabolically I’m pretty sure it will make a gain in real terms from where we are now because gold should have been priced at $1000 probably back in the 1990s if not for all the CB dishoarding, like when Gordon Brown sold all the UK’s gold for example.

      • retired_sandman

        Costs around $20 to pull the silver out of the ground and with declining ore grades and rising energy costs, that number is only going to rise. Peak silver isn’t far-fetched and you can see reference to it in the government’s own reports.

        Any time you can buy a commodity at or below the cost of production, you will do very well long-term. May not rocket tomorrow, but it’s a very, very safe long-term proposition.

        In the event of a collapse in the dollar, we’ll be trading in silver and barter. Gold simply isn’t practical as a medium of exchange. So, if you worry about the day we get Cyprused and the ATMs stop spitting out bills, you should go for bags of 90% coins. A silver quarter bought a gallon of gas in 1964 and it still does.

        13 kg of silver in every cruise missile, so a bull market in war would be a silver bull market also.

      • Steve Sheldon

        Rickards’ figure of $9,000 is based on the US still having all the gold they say they have in Fort Knox and Annapolis, but that is highly unlikely to say the least. So, do we just go on a partially gold backed currency based on nonexistent gold? I can’t imagine a real audit ever being allowed (assuming the gold is gone).

    • majorx

      Rickards didn’t directly address the issue of paper gold versus physical gold. If the value of physical gold goes through the roof then the value of shares of Gold should also follow it up. Why wouldn’t it? He did say that paper Gold would collapse because of the shortage of physical Gold to back it. But all outstanding shares already have Gold backing them as long as your in an allocated account. Is he saying that Gold trusts like GLD would sell the physical Gold out from under you leaving your shares worthless? Isnt that fraud?

      • Dale Holmgren

        Yes, it would be fraud; would that stop them? We’ve already seen the government do it before – with Chrysler.

        A group of hedge funds that were among Chrysler’s creditors initially objected to the bailout plan that preferred the UAW at their expense. In a now-infamous speech in April 2009, President Obama publicly attacked these investors — who were merely standing up for their contract and property rights — as profiteers, criticizing them for their unwillingness to make the same sacrifices as other investors (but not, of course, UAW members, who received a windfall). In response to this public browbeating from the President, the hedge funds caved and agreed to the terms. In the end, only one group of Chrysler bond holders — the Indiana state teacher and police pension funds — continued to object. Indeed, they objected at every stage of the process, but the Supreme Court declined to hear their case.

        Buy physical gold.

      • Bill197511

        The last figure I heard for the Comex, there were 112 paper ounces for every physical ounce of gold.
        I’m not sure about GLD, but wouldn’t be surprised to see a similar ratio. So unallocated gold wouldn’t be available for withdrawal. Best to buy the physical. The paper holders are in for a rude awakening.

      • cookielee

        Isn’t the entire government fraud? Isn’t the FED fraud? What about article one section eight clause 5 and 6? Their is nothing backing the whole system. Paper is nothing.
        Good-bye reserve currency of the world status. We are talking serious pain. Bad bad pain.

      • kelly

        if you don’t hold it you don’t own it. wake up!

      • Jim

        Duh!!!!

    • BoJangles

      Bottom line: Germany is stupid for assuming they’re going to get their allocated gold back, ouch!

      • retired_sandman

        When the fed said they’d return it in 7 years, I don’t know why they didn’t respond with, “OK. We’ll take ALL of our gold (not a mere fraction) in one month, and if we don’t get it we file suit”. Fed is a private entity (NOT US Government) and can therefore certainly be sued in a federal court whether they let themselves be sued or not.

        • RapidRay01 .

          Doubt that very much ! The American tax payers will probably be put on the hook to pay out for the short fall in gold supply . Just as in the Bailout of the ” Banks too BIG to Jail ” , as A.G. Holder stated . Congress knows that AIPAC and the Corporates own Washington and it’s politicians .

          • retired_sandman

            One thing you need to understand and understand very well is that at the present time the Comex is a paper market that only has 1oz of metal backing >100ozs paper gold. It is an accident waiting to happen at any time.

            Yes, I suspect if the germans filed suit the fed would go to the germans and say, “hey look. all you can hope to get back in an american court is the value of your gold in US dollars. So here are the (newly printed) us dollars.”. And if you mean americans will pay in the sense of their dollar being worth that much less, I agree with you. And the germans will get screwed also for trusting the us fed. And Venezuela that actually got its gold back will be laughing like a hyena. But the news something like that happened or was happening would be sufficient to topple the Crimex exchange which as of today has one foot in the grave and the other on a banana peel. What will happen at that point is what usually happens when trading on the crimex vanishes forever. They will pair off shorts and longs at the last traded price on the crimex while the price for the actual commodity goes through the roof. Basically anybody holding paper gold (be it crimex options, GLD shares, or whatever) will take it in the rear.


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