“We think that there’s a lot of stresses out there and we think gold is going to perform well against those stresses,” says Sprott CEO Peter Grosskopf in this interview.
At this year’s Mines and Money Americas conference in Toronto, the Investing News Network had the chance to catch up with Sprott (TSX:SII) CEO Peter Grosskopf, who shared insight on the current state of the gold market and where he thinks it is headed.
As gold comes off of another tough quarter and prices continue to hover around the US$1,200-per-ounce mark, Grosskopf believes the yellow metal will rise once again, particularly if it can garner appeal from a wider investor base than it has in the past.
“I think it’s time for gold to appeal to a wider investor base,” Grosskopf said. “I think digital gold is the way that will happen … that’s going to be one way.”
He added, “you have that gold sitting at the vault on your behalf, and the blockchain will allow it to trade very rapidly and will allow you to buy it very cost effectively. So that’s going to be a factor in the future.”
Listen to the interview above or read the transcript below for more insight from Grosskopf, including his thoughts on silver outperforming gold and how precious metals may fare in the upcoming fourth quarter and into next year. You can also check out the full Mines and Money Americas playlist by clicking here.
INN: How has the conference been so far? Do you have any highlights?
PG: Well, we just got here today so it’s our first hour or two in the building. I would say it’s a busy crowd as usual at this conference.
INN: Great. Now, both silver and gold came off another tough quarter. Which precious metal do you think fared a little bit worse than the other?
PG: Well, I don’t look at the very short-term performance between gold and silver, but I would say that we believe silver has a certain attraction to gold, which is it’s a much smaller market and when the factors come in that give gold a bit of a tailwind and gold starts to perform, silver usually performs better. It’s just a smaller market and it gets squeezed quicker.
INN: There’s the idea that we’ve reached peak gold floating around, and also that silver is primed to outperform gold. Do you believe either of these theories, and how do you think that it will affect the precious metals?
PG: I don’t really believe in the theory of peak gold, per se, because it’s being used as a basis to say that’s a really significant impact on the price. We don’t think it is. Gold trades, you know, probably $70, $80 billion a day. I don’t think gold output has anything to do with the gold price. However, I do believe that gold has been produced in peak quantities, and that going forward companies will be able to produce less of it, it’s just harder to produce. Sorry, what was the second part of the question?
INN: Silver outperforming gold, do you think that it’s prime?
PG: I do. I do think that we’re right around the corner, and the reason for that is I think that all of our indicators are that gold has reached a nadir of popularity. It is so unpopular right now as an asset class. It should hit a turning point fairly soon, and when it does silver will, as I mentioned, go up a bit more than gold I think.
INN: Okay, great. Just switching gears a little bit, I was wondering if you have any tips on the most cost-effective way to purchase silver and gold in the current market.
PG: Well, that is getting into the core of our business, so I’m happy to talk about it. Look, I think that the gold market needs to innovate, and we have spent a lot of time and money investing in digital gold, which I think is just as important to the gold business as the ETFs originally were in the early 2000s. I think it’s time for gold to appeal to a wider investor base, and I think digital gold is the way that will happen. So that’s going to be one way.
In terms of the listed gold products, I guess my recommendation at this time is we a have liquid large gold trust that trades on the Toronto and New York exchanges, and it’s trading at I think a 3- or a 4-percent discount to the underlying spot price, but it holds underlying physical gold. So you can buy these listed funds and you can get pretty good deals on them compared to the gold price these days.
INN: And you mentioned digital gold. Can you just give a little — quick little synopsis on that for our viewers that might not know exactly what that is?
PG: Sure. So digital gold is a blockchain-based digital certificate which reflects ownership at a major vault, and it’s not a figment of someone’s imagination. You have that gold sitting at the vault on your behalf, and the blockchain will allow it to trade very rapidly and will allow you to buy it very cost effectively. So that’s going to be a factor in the future.
INN: And do you see that starting to rise in 2019?
PG: I think it’ll start rising in the next couple of weeks. We have a website launch planned that should start some bigger volumes coming through for digital gold.
INN: Okay, great. My last question is just a general outlook for the precious metals for 2019.
PG: Well, I think we are close to a turning point, and the reasons for that are multiple. First, the sentiment is very poor and the technicals are pointing to the fact that there should be a turnaround soon.
Secondly, gold’s never been less popular compared to S&P stocks and bonds than it was over the last year, and I think that relationship will break down. I think gold will gain some attraction as an insurance asset. And then thirdly, you know, there’s been all this talk about the economy being good. I think that’s because of tax cuts and rates being higher — again, they had to normalize sometime.
But the real story is going to come out in 2019. Is the economy really that strong and can the Fed really keep raising rates? We don’t think so. We think that inflation’s coming back. We think that there’s a lot of stresses out there and we think gold is going to perform well against those stresses.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.