A highlight of the recent Sydney Gold Symposium we attended was the panel discussion at the conclusion, which featured the 4 big names of the event:
- Eric Sprott – Sprott Asset Management
- John Embry – Sprott Asset Management
- Egon Von Greyerz – Matterhorn Asset management
- Ben Davies – Hinde Capital
This was the audiences chance to put their questions to the presenters. the panel discussion was convened by Kris Sayce of moneymorning.com.au whose writing we always enjoy. Kris put a couple of difficult questions to the panelists himself to begin with. He started it off with a double header…
How much of your wealth should you have as a percentage in precious metals? And…What is your gold price projection?
Eric Sprott outlined that as an investment manager 80% of his funds are in bullion or in precious metals shares, so he felt you should have a large percentage in precious metals.
John Embry was slightly less bold saying you could start off with 5-10% if you were unsure. Often people dip a toe in the water and then build from there. But you could have the vast proportion of your wealth in precious metals.
Eric Sprott being always the salesman was quick to quip “If you put 10% of your money into gold it will end up being 100% of your assets eventually!” i.e. the rest of it will be worthless!
Ben Davies was the only one to make a price projection: He said it will likely be infinite, implying that paper money would, as Voltaire once said, return to it’s intrinsic value of zero. In answer to the question of percentages of wealth in precious metals, he recommended a third in real assets such as gold and silver, a third in your house, and a third in cash.
Egon von Greyerz on price projections: “Irrelevant – forget about it” and commenting on How much in Gold? His company recommended to their clients in 2002 to put up to 50% of their assets in gold. So now he says anywhere from 80-100% as there is simply no where else to go to protect your wealth.
Next from the floor came the question…
What is the chance of the nationalisation of gold mining stocks as Government’s become desperate for revenue?
Eric Sprott answered, there is a very real possibility of this, however the positive to look at for holders of bullion is that this would lead to a reduced supply as government run mining will always be less efficient than the private market. So while some shares in the wrong markets could suffer, it is likely to be positive to the price of physical gold. (I guess from this you could infer that it’s wise to not just hold gold mining stocks as your only exposure to the sector. Shares still have a counter-party, whereas physical gold in your possession has no counter-party risk).
Will there be a return to a gold standard and if so at what price?
John Embry commented that he believes it will happen eventually but could make no prediction as to at what price.
Ben Davies: He believed we are heading towards what he terms a “free gold standard” or a free market gold standard (not fixed by governments), implemented with the aid of the advances in technology we are seeing currently. (He had earlier concluded his presentation with this theory, being you are likely to use say your Google Android Smartphone to pay for goods and services with a digital gold backed currency.)
Next up was a question from an “old timer” in the audience…
What would happen if you weren’t allowed to own gold again like in Australia’s past where it was illegal to own gold bullion for 200 years?
Eric Sprott always the entrepreneur was the first to see the potential for profit: “I’d like to own a jewelry store then! We’d be wearing 400oz bars around our necks!”
Von Greyerz believed this would not succeed in Australia or elsewhere now as their widespread ownership would result in riots. The public simply wouldn’t accept it.
Panel convener Kris Sayce then asked, given that the vast majority of today’s transactions are made electronically via Eftpos and credit cards…
Is hyperinflation possible without physical printing of money?
Ben Davies said money will still make it into circulation even if it was only in digital form, so shop keepers for example would still put up their prices (as there would be money chasing the same amount of goods), so it is a moot point.
Egon Von Greyerz went further and said it would be even easier as rather than having to crank up the printing presses and have the notes distributed, all they would have to do is add some zero’s in the electronic system!
If you’re interested in gold and silver shares/stocks then the next question from the audience is for you…
Are royalty companies (such as Silver Wheaton and Royal Gold) safer than just straight miners?
Eric Sprott answered this one. Input costs will go up for miners (e.g. oil etc) so it makes royalty companies a safer bet. (Note: if you’re wondering what a royalty company is, they provide early stage funding to developing miners in exchange for a share of future profits i.e. a royalty).
A frustrated audience member then asked…
How fast will we convert the “non-believers”? i.e. When will the masses realise we need something other than unbacked paper at the centre of our monetary system?
The panelists agreed that penetration is still somewhat low (as demonstrated by the comment in Von Greyerz presentation the previous day that none of 250 Family Office (generational wealth) Managers he had presented to recently held gold for their clients https://goldsurvivalguide.co.nz/gold-symposium-sydney-egon-von-greyerz-apocalypse-soon/).
However John Embry commented that when an ideas time has come it will happen very quickly.
Ben Davies referred back to one of the main themes of his presentation being exponential growth and referred to the “knee of the curve”. (the point on the exponential curve where the slope suddenly heads almost vertical) “When it goes it really goes!”
Next up from the floor was…
Couldn’t Governments implement first say a 20% gold backing, 40% later on etc etc?
Egon Von Greyerz answered: The whole system will have to collapse first and a complete change of governments before a gold standard is enacted. (Not sure if that completely satisfied the asker of the question but time was running out and Ben Davies and Eric Sprott then exited to do a TV interview.)
When will Asset Managers change their mind on gold and include it in a reasonable allocation beyond a fraction of the mere tiny percentage they hold in commodities?
Von Greyerz had a straight forward answer to this but it didn’t come with a time frame. “It will happen when the returns [on everything else] are so bad they can no longer ignore it”.
The final question that Kris Sayce asked of the 2 remaining panelists was a good one,as it’s one we hear a lot too, especially from people starting out in precious metals…
What percentage should I hold in gold versus silver bullion?
Egon von Greyerz gave a very balanced answer in that it depends on what type of investor you are. If you’re nervous then hold mostly gold as the “silver drops could kill you!” He also put a max on silver at 25%. However he also had the proviso that it depends on where in the world you are, as in Europe where he and most of his clients are based, there is a 25% VAT tax on silver.
But the one point he did make which we had never heard before ourselves, was that in the last few months of the Wiemar German Republic hyperinflation the gold/silver ratio actually went up dramatically. That is, gold went up markedly at this time in comparison to silver.
John Embry had a somewhat higher proportion of 50/50. However he finished by saying if Eric was here he would say 100% silver. (Recall that Sprott Asset Management has started a Physical Silver fund in the last year). So that is definitely a case of “talking your book!”