Border Gold is one of Canada’s leading silver and gold dealers and one of the largest Royal Canadian Mint direct distributors in Canada. Robert Levy, Managing Director of Border Gold and Global BC Financial Contributor discusses the near and long-term outlook for gold.
The following is a transcription of the above video and The Market Online has edited it for clarity.
TMO: Well, to get started, gold has added around US$700 an ounce in the last year, and it’s been almost a 30% increase. Why are we seeing this trajectory for gold?
Levy: I think there are two factors really that’s driving this rally. One is the short-term factors and it’s the geopolitical impact and the story there. What’s going on around the world, whether in the Middle East or Russia and Ukraine, or China and Taiwan, investors want a safe-haven in the near term. The other big mover of this market is gold and the U.S. dollar and the fact we’ve had rampant inflation, increased budget deficits and government spending. So gold is your long-term, de-facto play against that for protecting your purchasing power. So you got the short-term driving factors, the longer-term driven factors, but together they contribute to make demand for higher gold prices and stronger precious metal prices.
TMO: Alright, well, I also recently interviewed Rick Rule, who is definitely pro gold. And one of the main reasons for him saying that this is a good thing to get and to have is the inflation of the U.S. dollar. So gold trades in U.S. dollars. How does the impact of the U.S. dollar impact the value of gold?
Levy: Well, if there’s a long-term currency debasement story, which we sort of see with Western governments all around the world, that’s bullish for precious metals. And we always focus on the price of gold in U.S. dollars, but the price of gold in Canadian dollars, it’s been on an absolute tear over $3,800 Canadian an ounce. So there is a long-term story about currency debasement and investors seeking protection of their purchasing power and looking to precious metals for that.
TMO: Do you see the Trump presidency potentially affecting the price of gold?
Levy: Not particularly, at least the trajectory in the near term. It’s the volatility or the fireworks of what’s going around the world. Perceptions that this might be a president at the least prompts some peace in the Middle East. Maybe that takes a little bit out of the price of gold. This rally in the precious metals market really started October 7th of last year, and it’s been going ever since. So I think a peace story might be a little bearish in the near-term for gold. But I think, you know, relating back to the previous question, regardless whether it was Trump or Harris, it was going to be a U.S. presidency and administration that was going to continue to spend more money. So the long-term theme for precious metals is still there, regardless of who’s president in the United States. It’s just, we might see a little volatility with this president south of the border and for investors that just creates buying opportunities.
TMO: Would that create more purchasing of gold, getting more gold to deal with that volatility?
Levy: I mean, new trading ranges always attract new investors. So, that’s one part of the story. And especially when you see that wider volatility, those big moves to the down days, I mean, that’s when long-term investors see a pullback in prices and think, “okay, gold’s on sale today,” so now’s a good time to invest.
TMO: All right. Now the question people ask is, can gold keep going up? I think we’ve answered that, but..
Levy: You know, it’s the tricky one. The famous economist, John Maynard Keynes, said, you know, in the long run we’re all dead, but in the long-term, yes, gold prices will keep going higher because of what we’re seeing in the world today. And no government wants to tackle or reign in government spending. So as long as there’s administrations around the world that continue to spend and aren’t really accountable to me that’s bullish for metal prices.
TMO: And that looks like that’s a global situation. That’s not just in North America?
Levy: Exactly.
TMO: Now, why is now a good time to buy gold?
Levy: Well, for a particular investor, it’s always a good time to buy gold because you’re always rebalancing or adjusting your portfolio. And to me, gold and precious metals are a good way to hedge and diversify and balance your risk. So, you know, we’ve had a record run in the stock markets this year. Anybody that was invested in stocks basically made money. So, there’s always time for a little rebalancing and considering what your risks are and hedging a little bit of that with exposure to precious metals.
TMO: Alright. Now, globally, geopolitical events are drastically impacting the price of oil. How does gold also get affected by these events? I know we touched on that earlier, but maybe a little bit more of a deeper explanation.
Levy: Yes, it’s a similar story because when you look at commodities like oil, that’s very much driven by the supply and demand story. So you have something that goes on in the Middle East, maybe impacting a country like Iran, and you talk about 3 to 4% of the world’s global oil supply, that has a direct impact on prices. But similarly, that sort of instability in the region that says to investors, “okay, we don’t know how the next couple months are going to play out. There’s concern here I need to hedge a little bit.” We talk about a decoupled world where it’s not as much the U.S. dollar as your predominant safe-haven. Investors need another alternative. And that’s where gold really plays a role. When investors are looking for safety that’s the yellow metal.
TMO: Now Trump has endorsed cryptocurrencies and Bitcoin is surging. How does gold compare to crypto?
Levy: Yeah, you know, gold unfairly is compared to cryptocurrencies because of the reason a lot of investors look at them as both alternatives to the U.S. dollar. Gold is your long-term, historical and proven safe-haven. It’s got a track record as a safe haven and as a hedge to the U.S. dollar, cryptocurrencies are new. To me, cryptos are a lot more speculative and not proven. They haven’t been sort of tested for the length of time that gold has. They might both serve a role in a portfolio but gold is your long-term proven safe haven. Cryptos are your more speculative play.
TMO: Now, let’s just carry it down a little bit further and take a look at a portfolio you want to diversify. In your opinion, what portion would you allocate to gold?
Levy: It comes down to the individual investor and their allocation to other asset classes like equities or fixed income or alternative investments. I mean, gold has always been a part of that sort of cash position of your portfolio. Maybe somewhere around 1% or as much as 5% in your portfolio. It’s up to the individual investor. But there’s a role for every investor to have a little bit of gold in the portfolio for a number of reasons that we talked about. It’s haven aspect. Something goes wrong in the world and gold is your hedge. It’s your liquidity aspect that is outside the financial system where you might not sell a stock or a bond one day. You know, you can always get cash for an ounce of gold.
TMO: Now, inside of the gold world, there’s ETFs, there’s gold mining stocks, and there’s also physical gold. How would you sort of diversify through those?
Levy: Well, I think precious metals are just very different than all of the above. The mining stocks have been troubled in this environment. We have record-high precious metal prices, gold prices, yet the mining stocks don’t seem to perform the same way. So that’s the challenge that sector’s been under. And the ETFs, I mean, they’re fine, as exposure to the physical price of gold, but they don’t give you an added layer of diversification like your physical precious metals do.
TMO: On the physical side, how much are we sort of suggesting that people put aside and how can you invest in physical gold?
Levy: Well, you buy it through a dealer like us at Border Gold and whether you take delivery of it, you store it with us, those are all options for the individual investor and what’s right for them. From one-ounce coins to large kilo bars, it’s all what’s right for the individual.
TMO: Now and finally, this is the holiday season and a time for gifting. How can somebody gift gold?
Levy: The simplest form is a coin, gold or silver coins that mints make around the world that make it kind of fun to just your traditional store of wealth in a one-ounce bar. It’s better than cash.
Check out Robert Levy in Gold vs. Crypto, Advice on buying physical gold, Gold outlook for 2024 and Gold options from bullion dealers to Costco.
Gold was last trading at US$2,643.15 per ounce.
You can find Border Gold online and on location in Surrey, British Columbia.
Join the discussion: Find out what everybody’s saying on investor discussion forums at Stockhouse’s stock forums and message boards.
The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.
