Legendary and widely-acclaimed mining expert Pierre Lassonde, Chairman of Franco-Nevada (FNV) and President of Newmont Mining (NEM) from 2002-2006, recently spoke with Financial Sense for a wide-ranging interview on the mining industry, gold, and, lastly, natural gas.
Do you think gold will go much lower than where it's at now?
“The last buyer—the buyer of last resort—in terms of gold has been the Chinese. And their paying threshold is $1250. That's where they stick their hands out and say give it to me. And that's why gold stopped there.
You know, we heard Goldman talk about $900 gold and the Chinese decided at $1250 we'll take anything you want. And they absorbed 2800 tonnes at that price, which is enormous—enormous! And they're still there. So, I think the floor is pretty pretty solid.
I would give it very very little odds that we would break that $1250-1260 floor; not that it can't happen, but you have to understand for that to happen we'd have to have a disgorgement on top of the natural supply that we have and I think we're done with the gold ETF disgorgement. I think that we're done when in fact the COMEX is replenishing its supply—the net longs are back in.”
When do you think gold will start to rise again?
“To me, the only reason why gold will go up is if we start to see inflation coming back in the US. Until we start to see inflation, my view is that gold is going to go sideways, because at the end of the day gold is the proof in the pudding.
We keep talking about how the government has printed all of these billions, has inflated the balance sheet, and is doing all of these things—but there's no sign of inflation. Why? Well, the reason is very simple: because there's no velocity of money. The banks have not been lending and if you look at Europe it's even worse—the banks have been shrinking.
So, it's not only that the velocity of money is not going up—it's shrinking… So, you're not seeing inflation in Europe, you're almost seeing deflation, and in the US you're not seeing it. So, until you start to see that, I sort of think that the gold price will go sideways.”
So, even though you're not super bullish on gold over the next couple of years, you are however on natural gas. Can you explain why?
"If you look at storage [supplies]—I'm not going to say it's at an all-time low, but it is certainly at like a 10-year low or even 20-year low—it is frightening how low it is. And there's no way in the world that they're going to be able to replenish the storage between now and the next winter.
The rig count in the US right now is still at 300 and some, which is almost, again, like a 10-year low. So, with that, there's no way they're going to be able to replenish [supplies]. And if we have just an average winter next year, we are going to see $15 gas, simply because it's not there.
They're not going to be able to get the gas fast enough. So, yes, I'm very very keen on natural gas for the next 24 months and both Seymour and I are very large shareholders in Birchcliff, which is highly leveraged [to natural gas]."