Rick Rule - Many Black Swans that Could Hit This Market
With stocks turning higher, gold near $1,625 and silver at $30, today King World News interviewed one of the most street smart pros, Rick Rule, Founder of Global Resource Investments, which is now part of the $10 billion strong Sprott Asset Management. When asked about the tremendous volatility and wild swings in all of the markets, Rule responded, “What I see happening is a crisis of confidence. The market disarray in 2008 was famously attributed to black swans. As we’ve talked about before, there seem to be so many (black) swans on the horizon now that they resemble a cloud.”
Rick Rule continues:
“Will it be Greece? Will it be Italy? Will it be American municipalities? What I can tell you for sure, Eric, is that the incredible depreciation in commodity prices, not just gold and silver prices, but commodity prices in general that we have seen over the last week, are not a function of fundamentals, but rather a function of liquidity.
This is a set of circumstances that is going to be extremely unsettled and it’s going to be unsettled for a very, very long period of time. Unfortunately some of our clients and some of your readers won’t be able to stand it, but for those who do, the incredible price spikes, up and down that we are going to see are going to be a stock pickers paradise.”
When asked about gold, Rule replied, “If there is a bid for gold and a hedge fund is having trouble meeting redemptions, they will sell their gold. How long can this go on? I don’t know. Remember this, Eric, in the midst of the biggest gold bull market of all-time, the 1970 to 1980 bull market, when gold went from $35 to $850 an ounce, in the middle of that decade, in 1975, the gold price fell by half....
“Could that happen now? I don’t think so. The set of circumstances that caused that market to fall by half was an increase in real US interest rates and a consequent increase in the value of the US dollar. I don’t see that occurring.
Remember also, in 1975 when the gold price fell from $200 to $100 an ounce, certainly an unnerving event for people who were long gold, in the five years after that gold ran from $100 an ounce to $850 an ounce. So someone who got shaken out of the gold market, in a cyclical decline, deprived themselves of an 850% escalation over the next five years.
When asked about silver specifically, Rule stated, “I was just at the Doug Casey Research Conference in Phoenix and our Chairman, Eric Sprott, made the point that the paper market will be conducive to a sharp up move (going forward). When will this event unfold? I don’t know, but it certainly looks like a contingency worth speculating on.”
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