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 (see: www.gracelandupdates.com). 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.
By Lars Schall
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.
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.
