The Gold Report: In a recent article, you argued that investors in the West will find their way to gold when the new reality dawns on them that losing a bit of money to preserve the rest is “a good deal.” Please explain further.
Jayant Bhandari: What has to happen does not have to happen right away. Everyone in the world is flocking to the U.S. dollar. It offers liquidity, but eventually the U.S. dollar will become too expensive. When that starts happening people will look for other opportunities to safeguard what they own, and gold is something that will become increasingly visible.
TGR: How long is the U.S. dollar going to continue its ride?
JB: The U.S. dollar could do well for quite a period of time because while the U.S. is sinking, everything else is sinking faster. The European Union is in worse shape. Most of the developing countries, apart from China, are in horrible shape. They consume pretty much everything that they create. The U.S. dollar, despite all that is going on, remains one of the better currencies.
TGR: You also relate gold buying to how in India people buy gold and cattle—not necessarily because these are excellent investments but rather that these things will ultimately lose less value than other investments.
JB: A lot of people buy gold because of inflation but I don’t think that’s the reason why Indians, people in the Middle East and people historically in China have bought gold. As I mentioned in that article, the return from 300 million cattle in India is about minus 50–70%, depending on the kind of cattle. People invest in negative yield investments because they have few options in these societies. But that is what’s increasingly happening in the West. It started with the European bond market. This morning …read more