Why Gold is Going to $10,000: 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 cost-effective, convenient 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.  His upcoming book, $10,000 Gold:  Why Gold’s Inevitable Rise is the Investor’s Safe Haven, will be published by John Wiley & Sons later this year. 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 his bold predictions for gold and his reasoning behind said predictions.

Commodity HQ (cHQ): Why do you think gold is going to $10,000/ounce?

Nick Barisheff (NB): Right now the world is focused on Eurozone debt and the mathematical impossibility of Germany being able to rescue southern countries, not to mention the highly leveraged German banks that have helped finance their debt bubble. But the bigger story is the USA, where the debt including unfunded entitlement programs is in excess of $120 trillion [see also Were Gold and Silver Manipulated Alongside LIBOR?].

There are three ways out:

1. Cut Spending: The US government stops spending and printing money it doesn’t have, and the world’s largest economy goes into freefall as is happening right now in Greece, Spain and Italy.
2. Raise Taxes: With the economies worldwide hovering on the edge of recession and high unemployment rates raising taxes will further weaken the economy.
3. Print more money: The government, via the US Fed, accelerates its money-printing, and the US dollar continues to devalue. This doesn’t actually cause gold to go up, but fiat currency to go down against gold, the world’s real money.

cHQ: Can you give a timeline for when you think the precious metal will hit these prices?

NB: Five years seems reasonable. It could be sooner if any number of Black Swan scenarios unfold. The fact is that the world’s largest economies, governments, and banking institutions have never carried more debt, leverage, and associated risk. Not to mention corruption. What we’re seeing in our BMG BullionBars business is that the world’s 1% are becoming fearful. They are coming to us to purchase and store allocated, insured bullion in multiple vaults around the globe because they simply can’t predict any region’s financial stability.

cHQ: Obviously we are a commodity website so we cover gold quite often, but you feel that gold should not be considered a commodity, why is that?

NB: While there are industrial uses for gold, it has held up through 5,000 years of countless failed fiat currency regimes as real money. And gold’s role as money is on the rise versus on the wane. Last month the FDIC proposed to make rule changes and allow gold bullion to be recognized as a Tier 1 asset class with zero percent risk weighting.  Even the Bank of International Settlements (BIS), which is the central bank for central banks, is considering reclassifying gold as a risk-free asset as part of the Basel III framework [see also Why Jim Rogers Thinks Gold Will Drop 20%].

In the 2008 financial crisis, large institutional funds and banks were forced to sell gold because it was a Tier 2 asset worth only 50% of its true value on the balance sheet. European bankers have already proclaimed that gold will once again be considered as financial collateral for any/all sovereign Eurozone debts. As a planned Tier 1 asset, funds and financial institutions are compelled both to purchase and hold gold. Central banks around the world are ahead of the curve on this, having reversed years of selling their gold reserves. Countries like China have openly declared aggressive targets to add to their gold reserves. Sensibly, gold is again taking its rightful place as the ultimate store of value.

cHQ: You have a book coming out entitled “$10,000 Gold:  Why Gold’s Inevitable Rise is the Investor’s Safe Haven” What can you tell us about that?

NB: The book, which is being published by John Wiley & Sons, is now available for pre-order on Amazon.com. In the face of continuing market turbulence, $10,000 Gold shows readers that they can have a positive financial future regardless of how Wall Street or debt-laden central banks and governments perform. 5,000 years of economic history demonstrate that gold is the ultimate safe haven in times of uncertainty. Yet the book points out that gold is virtually absent in the large financial portfolios of global pension funds and insurance companies responsible for trillions of dollars’ worth of the world’s financial assets – making it even more important for individual retail investors to include gold in a future-proof financial plan [see also Why Buffett is Dead Wrong on Gold].

cHQ: Anything else you would like to mention or add?

NB: Most investors confuse money and currency, but they are not the same thing. Money is defined as a medium of exchange, a unit of account and a store of value. For centuries, money referred to coins made of rare metals (gold and silver) with intrinsic value, and to notes backed by precious metals.

Currency, while it is a medium of exchange, and a unit of account is not a store of value. It only derives its value by arbitrary fiat – government decree and hence the term “fiat currency”. Paper banknotes represent money but they are not money. They are simply promissory notes whose long-term “value” or purchasing power depends entirely on the fiscal and monetary discipline of the government that issued them [see also The Most Profitable Months to Trade Gold].

And therein lies the problem. In today’s era of massive fiat currency expansion by profligate governments across the globe, currencies are depreciating in value at faster rates than ever before. Fortunately for precious metals investors, gold and other precious metals have risen in value, both in purchasing power and in exchange rate. Precious metals will continue to rise in value against all currencies because they have once again resumed their historical role as stores of value: money.

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Disclosure: No positions at time of writing.