Gold's Only 'Threat' Is This Asset; Faces 'Existential Crisis' Says Rick Rule

December 16, 2020

The broad equities index remains the only “threat” to gold and gold investors, said Rick Rule, president of Sprott U.S.

“The bull market that we have experienced in equities and bonds going back to 1982, might lead to a circumstance where some investors and speculators believe that broad-based equity ETFs, like the S&P 500 ETF, are reasonable stores of value in terms of protecting one’s purchasing power. In other words, the broad equities markets, may develop in some people’s minds, as a competitor to gold,” Rule said.

The “existential crisis” facing the gold sector comes from the lack of exploration activity from miners.

“The industry under-invested in exploration, under-invested in development for a very, very, very long time. The consequence of that is that the industry is shrinking before our eyes,” Rule said.

Short-term, the ‘recedence of fear’, albeit unwarranted, caused gold to sell off from its August highs of $2,000 an ounce, but long-term, the metal is still in a secular bull market, Rule said.

The junior gold equities space was overbought this summer, Rule said. “I’ve never seen that before. I’ve never seen market leadership go from the biggest and the best early in the bull market and shift all the way downscale, leaving all the intermediate steps in the value chain out of the bull market.”

Long-term, the sell-off is of no significance, given that gold is still in a long-term secular bull market, Rule said.

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Gold is used in following industries: Jewelry, Financial, Electronics, Computers, Dentistry, Medicine, Awards, Aerospace and Glassmaking.

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