James Rickards: ‘Gold Never Changes Its Value,’ Currencies Do

Thursday, 11 Apr 2013 09:54 AM

By John Morgan

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The price of gold is always in an uptrend somewhere in the world, and investors can profit by combining a gold and currency strategy, according to James Rickards, senior managing director of Tangent Capital Partners.

Rickards, author of the bestseller “Currency Wars: The Making of the Next Global Crisis,” told Bloomberg TV that gold is up 25 percent in the last three months — but only if you bought it in Japanese yen.

“Gold is always rallying somewhere; right now it is rallying in yen. It you want to be fancy, you are short yen and buy gold,” he said.

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“At the end of the day you will come back to gold in dollars. Gold is not going to do much in U.S. dollars this year. I look for a dollar-gold move late this year or in 2014. Meantime you can always make money in gold, as in ‘it is always 5 o’clock somewhere …’ You’ve got to pick your currency.”

Monetary policy historically has a wrenching impact on gold prices, according to Rickards.

“The biggest program in the world today, the one the Fed is facing, is deflation. The fed is doing everything possible to create inflation.”

During the Great Depression — the most serious period of deflation in American history — gold went up 75 percent in dollar terms, he explained.

“Gold never changes its value,” Rickards said. “It’s just that currencies go up and down.”

Rickards told Bloomberg TV that it makes perfect sense for the state of Texas to repatriate the sizeable gold holdings in one of its state investment funds, as Gov. Rick Perry and some members of the state legislature have suggested.

Perry recently proposed moving about $1 billion worth of state-owned bullion from an HSBC bank vault in New York to a facility that would be constructed in Texas, The Washington Post reported.

Rickards is a vocal critic of Federal Reserve’s loose monetary policy and the towering debts the U.S. government has run up in recent years.

“Texas is not crazy. Texas is looking ahead,” Rickards said, adding that a total of 13 states have pending legislation to make gold legal tender.

In the face of global financial uncertainty, Rickards noted, Germany is in the process of moving its sovereign gold reserves from international vaults back to Germany, the Netherlands is also debating such a move and the issue of gold repatriation may soon part of a referendum in Switzerland.

“Texas is just acting like Germany,” Rickards stated.

GoldSilverWorlds.com said its analysis of Rickards’ currency/gold connection confirms that the “gold price is the best and most objective indicator of the price of a currency.”

“One should note also that it is fair to expect some patience before dollar-gold could go up. A decrease in dollar-gold could be in the cards as well, at least short to mid-long term. As the epicenter of the currency war is moving across the world, it makes sense that Jim Rickards expects dollar gold to go up as from 2014,” GoldSilverWorlds.com said.

In dollars terms, gold has declined about 6.1 percent in the past 12 months, and was at $1,557 per ounce in early trading on Thursday.

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