How QE3 Shakes Up Gold: Q&A With Nick Barisheff

Nick Barisheff is President and CEO of Bullion Management Group Inc., a bullion investment company that provides investors with a secure, cost-effective and transparent way to purchase and store physical bullion. Recognized worldwide as a bullion expert, Barisheff is an author, speaker and financial commentator on bullion and current market trends. The BMG BullionBars program provides a secure, cost-effective and transparent way to purchase and hold individual Good Delivery gold, silver and platinum bullion bars [for more gold news subscribe to our free newsletter].

We recently had the opportunity to talk with Mr. Barisheff about a third round of quantitative easing and how it impacts this precious metal.

Commodity HQ (cHQ): How do you see gold reacting to QE3 in the long term?

Nick Barisheff (NB): The day the QE3 details were announced gold futures rose over 2%, and in the last month gold is up nearly 10%. I think that by the end of this year gold will be US$1,900 and a growing number of analysts are expecting a price that will top $2,000 in 2013. QE3 debases the US dollar at an accelerated rate and will cause the gold price to rise. I still believe $10,000 dollar gold is likely in five years with the caveat that I may be conservative in my forecast. If currency expansion continues and hyperinflation begins it is difficult to say with any certainty how high the price of gold can rise.

cHQ: You have made the prediction of gold going to $10,000 per ounce, does QE3 expedite that timeline?

NB: The faster fiat currency is created, the faster the value of assets that can’t be created with a few keyboard strokes rise against the declining value of that fiat paper. Whereas QE1 and QE2 had specific amounts and timelines attached, QE3 is open-ended, with no capping amount, inferring it may be a permanent devaluation strategy to prop up what would otherwise be bankrupt financial institutions and sovereign nations deemed “to big to fail”. So QE3 absolutely expedites the timeline of any previous predictions [see also Why QE3 is Just Delaying the Inevitable].

cHQ: Why do you feel that investors should own gold?

NB: Eventually, investors will realize that the financial era of high returns for stocks and bonds is over, and that they have to own real money to preserve their wealth. Recently announced QE programs in the US, Japan and across Europe are all different, but the result is always the same for these countries. They are all systematically devaluing currencies against real money. The only effective way to respond to this global epidemic of wealth destruction is to buy and hold precious metals.

Certainly the world’s central banks want gold. In the second quarter of this year banks bought 157.5 tons of the metal, up 137% compared to a year ago. The World Gold Council says it is  the most gold purchased by banks since the Council began tracking central bank buying in 2009. China alone increased its gold bullion by six-fold in the first two quarters of 2012, indicating it would retain all of the country’s gold production.

Right behind central banks come billionaire financiers like hedge fund manager Kyle Bass, Greenlight Capital’s David Einhorn and Third Point LLC’s Daniel Loeb. They are all on record as favoring ownership of actual physical gold bullion bars – in allocated storage in a secure vault [see also Marc Faber Warns: Store Your Gold Overseas].

Meanwhile John Paulson told his clients at Paulson & Co. in February that gold is his best long-term bet, serving as protection against currency debasement, rising inflation and a possible breakup of the euro.

cHQ: What do you think is the most important thing for an investor to know about this precious metal?

NB: Ownership. As bullion’s popularity rises, there will be more schemes, frauds and leveraged investment products designed to part investors from what could be their real money. At the core of all of those schemes, often buried in the fine print, will be a shaky or non-existent bullion ownership structure.

For any bullion product, be it a fund or bullion itself, it’s crucial to demand documentation that legally gives you title to specific physical bars, and to not accept IOUs, paper proxies, or derivatives. As a recent SEC Investor Bulletin on ETFs states: “Do not invest in something that you do not understand. If you cannot explain the investment opportunity in a few words and in an understandable way, you may need to reconsider the potential investment.”

50,000 Polish citizens recently learned this the hard way after a fund called Amber Gold collapsed, owing them 80 million zloty (20 million euros). It is doubtful that any of the 50,000 people took the trouble to read and understand the documentation of Amber Gold – a fatal blow to their wealth preservation.

cHQ: Do you think QE3 is a last stand, or will we see continued money printing programs from the Fed?

NB: QE3 is a last stand in that it’s totally open-ended. But as with any addiction, it will work for users until it doesn’t, and when it stops working, there will be a catastrophic system failure. I think QE3 indicates continued money-printing in the extreme, and it’s extending far beyond the U.S. to other countries playing a game of competitive currency devaluation. The important thing for investors to note is that every fiat currency regime in the history of mankind, with no exceptions, has led to currency collapse. This time is not different [see also Were Gold and Silver Manipulated Alongside LIBOR?].

cHQ: Anything else you would like to add?

NB: I think that Bullion Management Group is in one of the most exciting growth businesses of the decade, and I’m glad we can help people preserve and protect their hard-earned wealth with what we call uncompromised bullion that maintains an ownership chain of integrity.

I’d also urge people seeking a deeper understanding of the topics discussed here to pre-order my book, $10,000 Gold: Why Gold’s Inevitable Rise Is the Investor’s Safe Haven, from or their favourite bookseller. It will be coming out later this year from John Wiley & Sons.

Don’t forget to subscribe to our free daily commodity investing newsletter and follow us on Twitter @CommodityHQ.

Disclosure: No positions at time of writing.

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Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.

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  • David Lowdell

    Mr. Barisheff says that you must “demand documentation that legally gives you title to specific physical bars”. Well, that is all well if you can trust the legal system to back you up. In a systemic failure, the politically connected will become unaccountable. This is already happening where not a single banker has been brought to account and instead some fines have been imposed upon the banks which in essence hurts the shareholders, not bankers. At the end of the day you are putting your trust in people. When the system collapses, as mr Barisheff envisions, how do we now that he will simply not abscond with peoples bullion, especially of those who probably would not have the means to pursue him. I prefer Mike Maloney’s advice that if you cannot hold it, you don’t own it. The only bullion you are certain to own is in your hand, all other permutations of it are derivatives and thus have counterperty risk like any other financial product. In other words, you can lose it all regardless of the legal niceties.

  • Barry Murray

    On Barry Murray, who holds 800,000 ounces of silver, on the surface, in galena ore ready to mine is wondering if he can trust anyone to do an escrow close for payment in silver, for silver. Especially when his purpose to use industrial silver to build solar smart roofs out of nepheline syenite… something that HFT traders don’t seem to understand.