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Eric Sprott: Gold as a store of value

February 12, 2011 Leave a comment Go to comments


Eric Sprott

Eric Sprott, CEO and Chief Investment Officer of Sprott Asset Management, considered one of Canada’s premier investment manager talked about gold as a store of value in a recent interview with ZeroHedge.

Question: Your views on precious metals are well known. If there is a collapse in the USD and/or fiat currencies in general, how will gold be valued?

They’d likely be valued in terms of other goods, rather than in units of fiat currency. Investors won’t care what an ounce is worth in USD if the USD can’t be exchanged for anything. They’ll want to know what an ounce is worth in water, or food, anything consumable.

I think most mainstream investors still struggle to appreciate the changes that have occurred in precious metals market since 2008. Gold is reverting back into a world reserve currency – it’s so clearly visible now. It’s one of the only asset classes that has ‘worked’ for investors and savers. And yet there remains this large contingent who continue to question its legitimacy as an asset class.

One of the great struggles investors continue to have with gold, particularly in the US, is in embracing it as a monetary alternative. There are money managers and pension trustees who refuse to view gold as a store of value. They don’t understand the value argument. It’s a peculiar thing. If we lived in a different environment today, I’d understand their hesitance to embrace gold, but after everything we’ve gone through, and after acknowledging the fiscal reality of the Western powers, I just don’t understand why anyone would question the benefits of a hard currency. We need a hard currency today for SAVERS. Gold is for savers. We all need some sort of risk-free return vehicle in a properly functioning financial system. Bonds pay a negative real return today, so we’re forced to up our risk tolerance into equities or high-yield. You can’t save capital in cash in this environment – it’s as simple as that. You have to find another asset class to perform that function, and precious metals are once again reverting to their traditional monetary status to meet that need.

Read full interview here. http://www.zerohedge.com/article/exclusive-interview-eric-sprott


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