Gold should be running higher during this period of inflation, but the metal was held back by the rise of cryptocurrencies, said Pierre Lassonde, chair emeritus of Franco Nevada, a behemoth in the royalty and streaming space with a current market cap of over $34 billion.
Lassonde spoke to Kitco on Tuesday at the 2022 Precious Metal Summit Zurich.
“I think a lot of gold bugs are asking themselves the question: ‘with inflation running at 7% to 8%, why hasn’t gold responded?'” said Lassonde.
“The answer is that 80% of the value of gold, long-run, is tied to the U.S. dollar, and for the last four years the dollar has been on a tear, and it’s essentially suppressed gold demand. The other reason is cryptocurrency. Cryptocurrency went from nothing to a $4 trillion industry in the space of less than 10 years. The entire Gen Z generation got attracted to it.”
Lassonde said that 2023 should be a good year for gold. With cryptocurrency in the doldrums and the U.S. dollar weakening, gold should get a lift. He estimates that 20% to 40% of gold liquidity was affected by the rise of cryptocurrency.
“With crypto imploding and the dollar rolling over, I predict that 2023 will be the year of gold.”
Valuations have been tough for miners, but Lassonde said that investors should embrace downturns. Lassonde said his former business partner, Seymour Schulich, said to embrace misery, as it’s the best time for bargain hunting.
“This is where we are today. The juniors are so unloved, it’s not funny. They are trading for a fraction of their value, and they cannot raise any money,” said Lassonde.
One bright spot is that many of the large miners are flush with cash after the recent run-up in metal prices. Lassonde also said that $1,700 is still a good price for gold.
Coverage of 2022 Precious Metal Summit Zurich is sponsored by Inventa Capital.
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0:30 – Why 2023 should be a good year for gold.
1:40 – Is the U.S. in a recession?
2:20 – Is the U.S. dollar going to lose its reserve status?
4:10 – Why is the battery metal space uncertain?
5:40 – Why are copper-gold projects “nirvana”?
10:25 – Why investors must love misery.