$17,250 Gold Inevitable, Billionaire Lassonde Says We’re in “Life-Changing Period”

Key Concepts

• Gold Remonetization: The increasing role of gold in central bank reserves and as a store of value.
• Currency Devaluation: The historical tendency of civilizations to devalue their currency to manage debt and fulfill promises.
• Budget Deficit and Federal Debt: The significant financial challenges faced by countries, particularly the US, due to accumulated debt and unfunded promises.
• Dolarization: The shift away from the US dollar as the primary global reserve currency, with China playing a role in this trend.
• Mining Industry Health: The current strong state of the mining sector, especially for established companies, and the ongoing struggles of the junior sector.
• Capital Allocation: The importance of disciplined capital return to shareholders through dividends and buybacks in the mining industry.
• "Carpe Diem" (Seize the Day): A core philosophy emphasizing quick decision-making and capitalizing on opportunities.
• People as a Key Factor: The critical role of talented and driven individuals in the success of projects and companies.
• Philanthropy: The importance of giving back and teaching younger generations about wealth sharing.
• AI's Role in Engineering: AI's potential to assist engineers but not replace human interaction and community engagement.

Gold Price Forecast and Remonetization

Pierre Lassonde presents a bold forecast for gold, projecting a price of $17,250. This projection is based on the concept of gold remonetization within central bank reserves and by other institutional investors like wealth funds, family offices, and hedge funds. He argues that even a modest shift of 1% of the world's invested money into gold would drive its price significantly higher.

Key Points:

• Limited Gold Supply: Only approximately 220,000 tons of gold have ever been mined, with annual production of about 3,600 tons, growing at a slow 1-2% annually. Production has been flat for the last seven years due to the difficulty in finding new deposits, environmental regulations, and the long lead times for mine development.
• Central Bank Shift: A decade ago, US dollars constituted 88% of central bank reserves, with gold at less than 10%. Today, the US dollar's share has fallen to 58%, while gold has risen to 20%, with further room for growth.
• Global Currency Issues: Free-floating currencies like the US dollar, Euro, Japanese Yen, and British Pound all face similar challenges, primarily massive budget deficits and debt exceeding 100% of GDP. Governments are unable to afford the welfare and benefit systems established in the post-war era, leading to a cycle of promising more to get elected rather than cutting benefits.

The US and Currency Devaluation

Lassonde highlights the US's historical tendency to approach financial "abysses" (budget deficits, federal debt, unfunded promises) and then pull back. He asserts that the time-honored method for nations to manage such situations is currency devaluation, a practice seen from Roman times to the present. He notes that every great civilization has ultimately devalued its currency, leading to the end of its empire.

Example: The Roman Empire began devaluing its currency in 180 AD, leading to an 80% devaluation by the time barbarians arrived, leaving no real money.

Personal Anecdote and Career Trajectory

Lassonde shares a personal story about his early journalism career. At 20 years old, he received an exclusive interview from Lassonde, then the "reigning king of Franco-Nevada." This interview was pivotal for his career, setting him on his current trajectory. Lassonde expresses gratitude for this opportunity.

Global Economic Outlook and Living Locations

Lassonde observes a significant number of people moving countries, indicating a global search for stability. He has personally relocated to Switzerland, specifically the Italian part, appreciating its blend of Swiss efficiency and Italian flair. He believes Switzerland's unique form of democracy, which holds politicians directly accountable to the people, prevents them from engaging in wasteful spending.

Canada's Economic Prospects

Regarding Canada, Lassonde is more optimistic under the current administration, particularly with the focus on developing the oil and gas industry and recognizing mining as a key sector. He notes the historical loss of major Canadian mining companies but believes there is potential to rebuild the industry, given Canada's vast landmass. He suggests that for Canada to achieve greater independence from the US, it might need to reintroduce gold into its reserves.

Trump's Impact on Gold

Lassonde considers Donald Trump to be "the greatest gift for gold," predicting that gold prices will continue to rise as long as Trump remains in power.

The US Dollar and De-Dollarization

While acknowledging the US dollar's continued dominance due to market size and liquidity, Lassonde discusses the trend of de-dollarization, particularly driven by China. He mentions the ICBC opening a large vault in Hong Kong to facilitate the exchange of RMB for gold for countries within China's sphere of influence. This mirrors the post-war system where central banks could convert US dollars to gold until Nixon closed the gold window. However, he believes the RMB will never become a true reserve currency due to the lack of trust in China's autocratic communist party.

The US's Resilience and Unfunded Liabilities

Lassonde reiterates his view that the US has an extraordinary ability to approach financial crises and then recover. He points to the massive budget deficits and federal debt, coupled with unfunded promises for pension and welfare systems, as significant challenges. He notes that this issue is not unique to the US, with Europe and other G20 nations facing similar demographic pressures (declining working populations supporting retirees) that make current welfare systems unaffordable.

Future of Life and Human Adaptation

Despite the economic challenges, Lassonde is optimistic about the future of life, stating that it is better than ever and will continue to improve due to innovation and human adaptability. He uses his experience with a 1965 car to illustrate the significant advancements in technology and convenience. He believes that even in situations of hyperinflation, people adapt.

Personal Success and Philosophy

Lassonde attributes his success to surrounding himself with better people and his ability to make quick decisions under uncertainty. He shares the founding story of Franco-Nevada, where an initial goal of skiing in Nevada for tax deductions evolved into acquiring a royalty that became immensely profitable. This experience solidified his "Carpe Diem" philosophy.

Goldcorp and Early Mining Ventures

He recounts the story of Frank Giustra convincing him in 2001 to invest in Goldcorp, which was then at the bottom of the market. This investment led to the creation of one of Canada's premier gold mining companies. He also mentions other successful ventures, like Ingred, where a $2 million investment grew to a billion dollars.

Health of the Mining Industry

Lassonde believes the mining industry is in better health than ever, with CEOs demonstrating discipline in capital allocation, returning value to shareholders through dividends and buybacks. However, the junior sector is still struggling, and the discovery cycle seen in the 1980s and early 1990s has not yet fully kicked in.

Investment Strategy and "People" Factor

Lassonde invests across the entire mining sector, from exploration to mid-size companies, emphasizing that "good people make good things happen." He is currently involved in a new project called Fuerte, which has extensive drilling data and is permitted, requiring the right team to realize its value.

Philanthropy and Legacy

Lassonde is driven by creating and giving away wealth. He involves his grandchildren in philanthropy, teaching them the importance of sharing and understanding the world. He is proud of his grandchildren's diverse career paths, including banking, engineering, and medicine.

AI and Human Interaction

While acknowledging AI's potential to simplify engineering tasks, Lassonde believes it will not displace people. He emphasizes that human interaction and relationships remain crucial in business and community engagement.

Advice to Younger Generations

His advice to young people seeking purpose is to "do what you're good at."

Bitcoin and Technology

Lassonde does not own Bitcoin, stating he doesn't understand the sector and sees no reason to own it.

Investment Across the Gold Sector

For those interested in the gold sector, Lassonde advises investing across the entire spectrum, including bullion, royalty companies, and a mix of senior, intermediate, and junior miners to maximize value and manage risk.

Identifying Talent

When assessing people for projects, Lassonde looks at their background, education, experience, track record, and whether they are "winners." He uses the analogy of geologists at Newmont, where a few individuals consistently produced the majority of the gold, highlighting that exceptional talent often combines preparation with opportunity.