View Opinion

Gold. With quantitative easing from central banks and, at the same time, governments, individuals and companies trying to deleverage, these 2 things are battling. Not bearish in the short to intermediate term of nominal prices of risk assets. There is Chinese fiscal stimulus, QE 3 and Infinity in the US and, in Japan it looks like there is another major round of stimulus coming. In terms of real economic growth and real growth in risk asset prices relative to underlying monetary inflation, he is still quite bearish. This leads him to be very, very bullish on precious metals and the underlying equities. This has been a switch for him. Gold is the place you have to be to play this increase in quantitative easing globally. There’s been 2 solid years of underperformance of gold stocks versus bullion. With QE 3 fully in place and with not only 40 billion of mortgages per month but the additional 45 billion in unsterilized in treasury purchases, plus the major news out of Japan with the new prime minister favouring a 3% inflation target, the Bank of Japan is going to have to do some major increases in their balance sheet.