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U.S. Dollar Downward Spiral by Year’s End, Gold to Skyrocket

The Daniela Cambone Show Mar 1, 2024

The U.S. is likely to face a recession by the end of this year or early next year, according to mining industry veteran Pierre Lassonde. Speaking with our Daniela Cambone, he highlights the concerning trend of the U.S. government accumulating $2 trillion in debt annually without a visible solution in sight. Lassonde predicts a decline in the U.S. dollar, which could drive up the value of gold. Additionally, he addresses the challenges confronting the Canadian mining industry, including the lack of investment from major pension funds, known as the Maple 8. Tune in to the insightful interview to discover strategies for safeguarding your wealth in these uncertain times.

CHAPTERS:
0:00 Gold
2:28 Gold ETFs vs Bitcoin
5:39 Out of the Dollar, into Gold
7:17 Gold as the Anti-Dollar
10:20 Demand for Gold
12:58 Canadian Pension Funds
18:56 Investment in Canada
22:26 Federal Reserve and Interest Rates

TRANSCRIPT FROM VIDEO:

00:05

Hi, this is Daniela Cambone and welcome back to the Daniela Cambone show now on ITM Trading. Well, today I am joined by one of the world’s best known mining executives, Pierre Lassonde, co-founded Franco-Nevada in 1982, based on an original concept of building a mining royalty company. Today, it is the largest royalty and streaming company by market cap. So please welcome to the show, Pierre Lassonde, Pierre. Always a pleasure to be with you.

 

00:33

Yeah, joining me from my hometown of Montreal. How are you first and foremost? I’m fine. I’m very busy these days. There’s so much going on in our industry, even though, you know, like people don’t realize, but the gold price is at a record high. So, you know, there’s a lot of things going on, but it’s not showing up in the ETF. It’s not showing up in the stock price, but it’s a good time for the industry. Well, let’s that’s exactly my, my, my point because.

 

01:02

with portfolio managers so focused on tech stocks, on bonds and whatnot, it just seems to me that despite the amazing gold price we’re at, where’s the interest in gold, Pierre? It’s not there. It is not in America. It is in China and it is in India. If you look at the disparity between, for example, the gold ETF, which has been draining gold,

 

01:29

Okay, like, you know, we’ve we’ve had over 100 tons of gold disappear from the gold ETF over the last 12 months And yet why is the gold price like at a record high? Well, it’s because China in particular and India You know the central banks those those central banks last year bought 1200 tons of gold That is one third of all the gold produced every year and

 

01:58

The sensibility of gold is it goes up $30 to $40 for every 100 tons. So you just do the math. The central banks of China and India in particular, China in particular, have moved the gold price by over $300 just by themselves. So it doesn’t matter what the American public is thinking, what they’re doing, where the gold price is being set today. It’s not in America. It’s in China.

 

02:28

But does it matter? Okay, you mentioned the ETFs and the Bitcoin versus gold debate has been renewed. It’s on fire again. I saw a headline on Zero Hedge, Bitcoin tops one trillion as gold ETFs dumped in favor of crypto. To give some context, since the advent of the Bitcoin ETFs, gold ETFs have in aggregate seen almost two billion in net outflows while Bitcoin ETFs have seen

 

02:56

net inflows of almost 4 billion. Now, I know you say this doesn’t matter, but at one point, does it become a problem? It’s not. My view is that there are two different markets. The people that are investing in the gold market are totally different than the people who are investing in the crypto.

 

03:17

and the crypto market is a very narrow market like very, very narrow it doesn’t take much to move that market because it’s like 90 control by just a very few people it would be like having a stock that is 90 owned by five individual well they can control the price and crypto is very much in that way so totally different the the gold market is such a you know

 

03:47

Just the amount of gold that exists today on the planet is over 15 trillion. But to give you an idea of the relative importance of the gold market, the magnificent six, the six largest tech companies in the world, by themselves have a market cap of 12.5 trillion, which is absolutely mind boggling.

 

04:13

And it also goes to the performance of the S&P 500, for example. It’s all driven by the Magnificent Six, because if you remove their performance, everything else is actually last year was down. And the only way you would have been a winner is if you’re part of the index, because the Magnificent Six did 54%. It’s a very, very disparate market. The gold market, you know, right now there’s no interest. You look at the, the, uh,

 

04:42

the value that you can get in the gold stock. It’s incredible. I mean, you know, they’re trading at like a five yield, like utilities. It does, and yet when you look at the Contango, you know, you have a Contango today, which is if you sell gold five years from now, you get a higher price than you get today. So you can assure yourself of a profit and that Contango is like, you know, three to 4%.

 

05:08

which is quite incredible. We’re back to where we were in the late 90s, where you have like a very high contango and that the value of your reserve in the ground should be the same as the value of your net asset value. And yet none of that, they’re not even trading at net asset value, they’re trading as if gold was gonna be like $1,500 tomorrow morning. So yes, there is an incredible opportunity right now for gold stocks.

 

05:39

And I want to talk a little bit more about gold stocks, but getting back to how China and India get it versus North American investors, I mean, besides, is it just mostly a cultural aspect that they’ve been always believers in gold? I mean, why do they get it and not North American investors? It’s two things. One, it is cultural. Gold has been part of the…

 

06:04

their economies for literally like, you know, thousands of years. But two, it’s also being promoted by their own government as a diversification outside the US dollars. If you look at the Bank of China, for example, they’ve been laying off their T-bills. They used to have like trillions of dollars of T-bills. Now they’re down by like 30%. And where does that money going? In part into gold.

 

06:34

They’re diversifying their gold, their reserve, out of the dollar into gold. And we’re seeing that in many other central banks where they wanna have a differentiation. They don’t wanna be beholden to the US because they’ve realized that the US can block all their financial system in one stroke of a pen. And they’re saying, you know what?

 

07:01

We gold, you can trade, you know, like there’s always going to be a buyer and it’s not attached to the U.S. So it’s a way to diversify your currency, your reserve, and that’s what they’re doing. And to your point, because part of your thesis of why you’re a believer in gold, and correct me if I’m wrong, is that you say the U.S. dollar has peaked and gold for you is really the anti, anti, anti-dollar.

 

07:30

Yep. Can you explain? Yeah. I mean, why is it the anti-dollar? You’ve heard me say it so many times on your show, Daniela, the gold is the anti-dollar. When the dollar function as the reserve currency that it is, you don’t need gold. You know, um, gold is an insurance policy. It’s there when the dollar doesn’t work. When you’ve got, you know, high inflation, you’ve got dislocation in government.

 

07:59

in the US, you’ve got incredible trade deficit, and we saw that in the 70s. What did gold do? It went from $35 all the way to $800 in a period of literally less than 10 years. It’s interesting because today we have the same conditions, but the dollar has become Tina. There is no alternative.

 

08:28

And so when you’ve got massive amount of money, where are you going to go? Well, you go back to the dollar because, you know, the euro is a bit of a suspect currency. It’s not really a one country. It’s a whole bunch of country that have different agenda, different laws and such. It there. You got the yen, which is a manipulated currency. The the central banks that decide, OK, we’re going to be so much against the dollar and they keep it there.

 

08:56

and it’s been managed for like the last 40 years. And then where else you gonna go? And so gold is really the only other place where you gonna go. And when I look at the current dollar, it’s overvalued, way, way overvalued. Only in one place, it’s in Switzerland. Switzerland, you know, you go there, a bowl of soup, I was there a week ago, two bowl of soup.

 

09:24

Two beers and a coffee was $100. Okay, it’s like unbelievable. But the dollar is way, when you look at China, they, China, Vietnam, all of the Asian country, they undervalue their currency vis-a-vis the dollar because they’re, you know, trade mercenaries. And at some point, there’s gonna have to be an adjustment. And at that point,

 

09:50

the dollar is not gonna fulfill its role. Look at the budget deficit in the US. It’s in the trillions of dollars. How long can you go? And at some point, and then you look at, you know, the Congress is not working. I mean, the House of Republican is not working. There’s a complete dislocation of government. At some point, it’s gonna impact the dollar and who’s gonna be the net beneficiary? Gold, for sure.

 

10:20

Before I want to talk to you about monetary policy, but before we move on, you know what’s interesting when we’re talking about demand for gold, you know, Costco can’t even keep up with their gold demand. I say that jokingly, but it’s true. And if I speak to my bullion dealer friends across North America, the volume is there. People are buying gold. Yep. Yeah, the physical gold is being bought where the

 

10:49

Gold ETF, it’s investment. And right now, you know, all the fun is in the magnificent six. That’s where you get all your performance. So that’s where people are going. And to your point about the mining stocks having to catch up, I mean, you know, they’re basically acting…

 

11:10

as if gold is 1500 an ounce and not over $2,000 an ounce. So is it something that the miners have to do more of? Are they missing something? I don’t really think so, Daniela. I think that, you know, the miners have instituted dividend policies. Some of them have instituted buybacks.

 

11:34

They are being incredibly careful with the allocation of their capital expenditure, their capex. They’re bringing all their costs down. So the miners this time around have done everything right. And you say, well, you know, maybe they’re not marketing enough, but you know what? They’re

 

11:57

all the industries are in the same boat. Like the oil and gas industry is no different than we are. They’re also undervalued as far as I can see. And everybody else, because there’s, you know, like the way portfolio managers invest today. You look at our, you know, pension funds, for example, here in Canada, and I’ll just, you know, segues into it because they invest only 3% of their money.

 

12:27

in Canada and that 3% is not even managed. They buy ETF. So you look at the US, where does the ETF money goes? Well it goes proportionally 56% of it in the Magnificent Six. So the more money comes in the ETF, the more over value they get and the more over value they get, the more money they attract. It is completely insane but that’s the way that the world works today.

 

12:58

I want to, you brought up the pension funds in Canada and you and our mutual friend Frank Juistra, I mean, kudos to you both. You’ve just gone on a media blitz trying to, you know, wake up Canadians, shake up the Canadian government, and you had a compelling piece in the Globe and Mail. And if I could just read a bit here. The global race to secure critical minerals for our green future is on, and sadly Canada is very much at risk of losing the plot.

 

13:28

In the past 20 years, Canada has lost almost all of its mining giants, Inco, Alcan, Falcon Bridge, Naranda, to multinationals. The solution, you both say, lies in our Canadian pension funds, dubbed the Maple Eight, representing 35% of all Canadian savings. You say pension funds must look into Canada’s resource sector. It’s imperative for you.

 

13:54

It really is. And when you look at, for example, Australia, which would be a comparable economy to Canada, the Australian pension funds have more invested in one commodity, lithium, than all of the pension funds investment in Canada. Think about that. I mean, how crazy is that? And there’s nobody in our Maple Eight, as we call them, the eight largest Canadian pension fund. There’s nobody there.

 

14:24

to talk to, there’s no specialist, there’s nobody that looks after Canada because the 3% or less that they invest in Canada is under an ETF. There’s nobody there. And it is crazy for government to spend billions of dollars to create a critical mineral policy for Canada when you’ve got no miners. If we don’t have anybody to mine the metal, you can create all the policies you want, you’re not going to go anywhere with that.

 

14:53

And if you let all your senior companies go, which we have, and we have a few left, and if you let them go, you’ll never get there. So you have to think that back in the 80s and 90s when we had the Falcon Bridge, the Miranda, Alicante, these companies spent hundreds of millions of dollars a year in research and development and also in helping the juniors.

 

15:19

because they were very well aware that the junior mining company essentially discover 50 to 60% of all new deposits. And for them, that’s their R&D budget. I mean, like, yes, you do your own exploration, but you help the juniors because you wanna be there when there’s a big discovery. You know, like, Voisey Bay, for example. Well, you know, who was funding that? It was Inco and it was tech.

 

15:48

Okay, they were funding Mr. Friedland’s company, they were putting the money in. Today, that money is not there, doesn’t exist. Those companies are gone. And on top of that, the public is not there. So our junior sector is dying on the vine. And you can proclaim all the mineral policy you want. If you have no capital, nothing’s going to happen. So

 

16:16

You have to look at where is the capital in Canada. 37% of Canadian savings. It’s 37%. There’s as much savings in the pension fund in Canada as all of our banks. Think about that. And only 25% of that money stays in Canada. 75% ends up creating jobs in Vietnam and China, everywhere else, but Canada. And of the…

 

16:45

25%, less than 3% is invested in Canadian public equities. And of that, it’s a fraction. It’s a 0.0 invested in the mineral sector. It’s completely crazy. It’s 15% of our economy and there’s no investment. So what we’re trying to do, Frank and I, is to really sensitize our politicians who created these pension funds.

 

17:12

that they should put some governance into them and say, hey, you’ve got to, you know, like look at creating employment, creating jobs, supporting our entrepreneurs right here in Canada before you put up your office in Beijing and Shanghai and Sydney, Australia and everywhere else in the world.

 

17:32

I mean, it sounds absolutely absurd to me, Pierre. And I mean, this isn’t just an issue related to, you know, the liberals, because this has always been the case in Canada, correct? Conservative liberals, whomever has been in power. So my question is, why hasn’t anyone thought of this? I mean, if you’re a governor, if I’m the prime minister, wouldn’t I wanna have that win and create jobs in my country?

 

18:01

You should absolutely 100% and you know you look at the competitivity of Canada it’s been sliding for like literally 40 years. Well why because you know like all our money is leaving Canada. If we don’t invest ourselves in Canada who else will? And that’s a big question you look at for example Daniela back in 1982 like essentially 40 years ago the

 

18:27

Canadian GDP per capita was 95% that of the US. Okay, our dollar was parity with the dollar and you know, like we’re 95%. Today, our per capita GDP is 72% of that of the US. Why do you think our dollar is at 73 cents? Okay, why do you think we’re lacking in competitively? I mean, like, because we don’t have the investment.

 

18:56

Are you, I mean, like I said, you’ve been doing a crazy media campaign and, you know, chapeau to you both. I mean, are you getting feedback? Is it getting any, is it landing on the right ears of the right politicians? Have you heard anything back that could be promising? Well, we’ve been able to make presentations to a number of finance ministers around Canada, as well as in Ottawa, some premier as well.

 

19:26

and we’re getting a very good reception. They have to get together at the end of the day and make a common front and decide what’s gonna be our policy. I mean, again, let me refer back to Australia. The Australian Superannuation Fund, which is $3.5 trillion, okay, it’s even more than our Canadian Pension Fund.

 

19:55

Can’t be showing about 2.7 trillion. This is 3.5 trillion. They invest 22% of their money in Australian public equities. 22% and they have the same performance as our fund here. So don’t give me the excuse that you cannot perform by investing in Canada, you can. It baffles my mind that in the…

 

20:23

Canadian history, there hasn’t been anyone in the cabinet that looked at what Australia was doing, for example, and thought, hmm, maybe we should do that here. So I’m just thinking, why, would there be a reason they wouldn’t want to do this? No, I think it’s sheer ignorance. I know it’s like, you know, you shake your head, but like that’s the case. And I’ll fix it. All right. Yep.

 

20:53

I urge you and Frank Guistra to please continue trying to obviously wake up folks in Canada to this reality. We are creating a wave and it’s going to get bigger and bigger and we’re not done and we’re getting a lot of support. I understand that, for example, the founder of Blackberry is coming out with an article very shortly in the paper.

 

21:23

not only supporting our position, but even like, you know, giving it another twist and We’re gonna get there I am absolutely convinced that number one is the right thing to do for Canada and We have to get there and the pension funds are not going to be shamed into doing the right thing They have to be told by government because their default position is well Our mandate is to give the best return to our shareholders. That’s why

 

21:52

we’re doing all of this. Well that’s BS, okay, because when you look at their return, they’re no different than anybody else. But they love to be able to get on a plane and go to, you know, Beijing and Sydney, Australia and then everywhere else in the world. Do you think they would open offices in like Thunder Bay and Shibugamo? Well, not quite the same, you know, like, so they have to be given a set of governance, a set of rules.

 

22:20

and it only can come from the politicians. Bingo. Exactly. One last point, Pierre, before we wrap, I want to get your thoughts on what the Federal Reserve is doing here in the United States.

 

22:38

Do you think, I mean, I just read this recent report from Wells Fargo. They think the Fed could slash rates more than expected in 2024, but we hear what Powell’s saying, you know, he’s kind of put the brakes on that kind of thought press process. Where do you think the truth lies there? What’s the Fed going to do with rates? You know, the, this has been the most predicted recession I think in history. Okay.

 

23:08

Economists have been talking about a recession for already almost two years. It’s been very difficult to predict the economy because of the vast amount of money that the public saved during the COVID. And there’s been a huge enthusiasm in spending that money and it didn’t matter what interest rates were, they plowed right through it, but now we’re getting to the end of it. And I think that Wells Fargo is

 

23:36

probably right that at the end of the day, we’re going to end up with a recession by the end of this year early next year and the Fed has no choice but reduce interest rate. Even the US government cannot afford the rates that they are today. They’re adding two trillions of debt every year with their budget deficit. So the US not only consumer but the US government, they both have a debt problem.

 

24:05

And frankly, there’s no solution in sight. So I don’t know what’s going to happen, but the dollar’s got to go down. And if the dollar goes down, gold’s going to go up again. And do US equities go down? More than likely, because if you get a recession, well, the question is what will the magnificent six do? Because when you look at the other,

 

24:33

494 stock in the S&P 500. They were down, you know, the average was actually down last year. The only reason the S&P outperformed is because of the magnificent six. So there’s a total disconnect between these six stocks and the rest of the market. But what for you will bring the US dollar down when we keep hearing, look, it may not be great.

 

25:01

but it’s the best house on the block, Pierre. When the economies in China and Europe starts to outperform the US economy, then the flow of money will go back to Europe, will go to Asia, and at that point in time, the dollar is gonna go down against these currencies. So I would expect that to happen by the end of this year. So if you ask me, for example, do I think gold’s gonna go up tomorrow morning? The answer is no.

 

25:30

I think that it’s going to be sideways for the next six to nine months, but am I bullish like medium to longer term? Very bullish. But to your point about China, we see the headlines that they’re grappling with a $7 trillion downturn as the country’s debt levels are just out of whack here. So how would China be a threat?

 

25:55

Well, the consumer is not as much in debt as the American consumer. Yes, the level at the high level, the various level of government, they do have a fair amount of debt. But it’s a managed currency. They can do whatever they want. It’s not like, you know, they’re open to exchange rate fluctuation. They can do what they want. It’s a managed currency. And that’s why it’s never going to be a reserve currency.

 

26:24

unless it’s back 100% by gold, because at that point it’s gold that’s the reserve currency. And is that going to happen? No. But why do you think they’re buying gold? Again, because they don’t want to have to deal with their US dollar. And to your point, I’m sure a lot of people watching will be happy to hear you say that gold will go up and that you’ve never really ever lost confidence in gold. I mean,

 

26:51

Especially when like I started by talking about the Bitcoin versus gold debate. It’s hard to get caught up in crypto fever. And you think, am I making the right decision being invested in gold? But your your loyalty to gold has never wavered. Well, the fate of all reserve currency is to go down. It’s whether you look at the British pound in the nineteen hundred, whether you look at, you know, the Italian before that.

 

27:20

which was the reserve currency, the Ducat, whether you look at the Roman, the Aureus, the fate of all reserve currency is to go down. And the dollar, when you look at the dollar over the last hundred years, vis-a-vis gold, it’s been going down. And it’s always in waves. It goes up and down, it goes up and down, and right now we’re at the top of the wave. So when I look at

 

27:46

where we are vis-a-vis gold and vis-a-vis the other currency, whether it’s this week, this month, I don’t know, next month, but what I do know is that over the next four years it is going to go down.

 

28:01

Pierre Lassonde, I always enjoy speaking with you. Thank you today for all the knowledge you bring and really a history lesson. Thank you. I know you have a conference to get to. Yeah, thank you so much, Daniela. Always a pleasure and always ready to speak with you. I appreciate that. And thank you for all you do for the industry, Pierre. We’ll see you soon and thank you all for watching. We’ll have more great content coming your way. So don’t forget to sign up at danielacombone.com. That’s it for me.

 

28:31

Thanks for watching.

SOURCES:
https://www.franco-nevada.com/home/default.aspx

https://www.youtube.com/watch?v=g9uMhsDf2lI

https://www.gold.org/goldhub/data/gold-reserves-by-country?gad_source=1&gclid=Cj0KCQiA84CvBhCaARIsAMkAvkLqzYoiaa351miXcGaoApqrSzy2OGpP6Dg5gRKRuYbR0H6PqhnAIygaAjlVEALw_wcB

https://www.forbes.com/sites/williampesek/2024/02/09/chinas-7-trillion-crash-masks-the-really-bad-news/?sh=69fe6c445359

https://www.businessinsider.com/fed-rate-cuts-outlook-recession-economy-job-market-unemployment-rate-2024-2#:~:text=The%20Fed%20could%20slash%20rates,Fed%20to%20ease%20monetary%20policy

https://www.theglobeandmail.com/business/commentary/article-canadian-pension-funds-must-invest-more-in-the-domestic-resource/

https://www.cnbc.com/2024/02/19/magnificent-7-profits-now-exceed-almost-every-country-in-the-world-should-we-be-worried.html

https://cms.zerohedge.com/s3/files/inline-images/bfmFED7_0.jpg?itok=eDzyP_UY

https://www.google.com/finance/quote/.INX:INDEXSP?sa=X&ved=2ahUKEwi50qastdGEAxUjLUQIHdIvBRMQ3ecFegQINBAX&window=YTD

https://fred.stlouisfed.org/series/CUUR0000SA0R

https://www.cnbc.com/quotes/.DXY

https://www.google.com/finance/quote/FNV:NYSE?sa=X&ved=2ahUKEwjskPuN4NOEAxUoke4BHSpBBPkQ3ecFegQIaBAX&window=5Y

https://www.google.com/finance/quote/GCW00:COMEX?sa=X&ved=2ahUKEwjkh42E49OEAxWUMUQIHSEaAP8Q3ecFegQIDRAX&window=YTD

https://www.google.com/finance/quote/BTC-USD?sa=X&ved=2ahUKEwiElv6F5dOEAxXgJEQIHdesCAYQ-fUHegQIDxAY&window=YTD

https://www.google.com/finance/quote/GDX:NYSEARCA?sa=X&ved=2ahUKEwiblJ655dOEAxVdlu4BHX0bBZsQ3ecFegQIHBAX&window=5Y

https://www.marketwatch.com/investing/index/dxy

Sources & References In This Article

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