-->Lassonde sees gold strong for years

By: Tim Wood


Posted: 2004/02/04 Mi 21:45 EST | © Mineweb 1997-2004


NEW YORK (Mineweb.com) -- Newmont president and gold bull with money to show for it, Pierre Lassonde, remains upbeat about gold prices for at least the next two and half to three years, mostly due to currency pressures.
“It’s clear from the past two years that the dollar has had a correlation of something like 90 per cent with the euro. In other words the euro has taken the brunt of dollar devaluation... closing in at a $1.30 to the euro, it’s getting very painful for Europeans,” he said in comments made during the company’s fourth quarter and annual results conference call.

That was a reference to an early December 2003 report in the Daily Telegraph that the European Commission was considering exchange controls because its politicians think America is making them pay for its recovery. They have backed down somewhat, but the jitters are plain to see.

So far, Asian countries have vigorously defended the dollar by buying it whilst printing more of their own currencies. The engineering has had a moderate impact so far and gold bugs continue to hope that at some point those countries will cut their losses and switch to gold.

Indeed, the gold community was abuzz recently when Japanese Finance Minister Sadakazu Tanigaki made an inscrutable reference to shifting some foreign exchange reserves into gold. As far as official Japanese pronouncements go though, he may as well have been talking about swapping sashimi for zinc.

Lassonde’s optimism is about more than Japan though. “What has not yet happened is devaluation against the Asian currencies and they’re defending [the dollar] to the hilt... If there is a contest between Japan buying the currency and the Fed printing the money, I’ll vote for the Fed. They can print it faster than the Japanese can buy it.

“The Fed has a very benign, almost neglectful attitude toward the dollar. As long as it doesn’t fall too far, too fast, they are going to let it go,” he added.

Contrary to mainstream gold bug opinion which has held that the US economy is running a false spring where the rising GDP and employment blooms are on the verge of being iced over, Lassonde acknowledges that there is a worldwide recovery “led by China and the US.”

“In fact, in the US, we’re seeing the best recovery money can buy. That is a function of the deficit.” That leaves Lassonde concerned that American interest rates are set to rise.

“Total debt - private, corporate and household - is close to 295% of GDP and it seems to me that the Fed has painted itself into a corner. There is not a whole lot of room to move interest rates,” he says, adding that there won’t be much risk of upsetting the president’s chances ahead of the November general election.

He also reiterated the gold-positive impact of the growing budget deficit with government spending racing far ahead of revenues and likely to balloon even more as the Bush administration attempts to buy votes by ladling out entitlements.

Lassonde warns: “Who’s going to pay for it all? We’re currently paying for it through the current account deficit which is at 5 per cent of GDP... and it’s being paid for by the Asians. We spend, they save. In doing so we’re digging ourselves a hole to China - but that won’t last forever either.”

Consequently, he remains convinced that gold will continue to appreciate this year. And so far, very few people have timed gold as well as Lassonde and his business partner, Seymour Schulich.

Look out for Mineweb’s lengthy interview with Pierre Lassonde that will be published later this month.


<ul> ~ der muß es ja wissen</ul>