Pierre Lassonde co-founded Franco-Nevada corporation, served as president of Newmont Mining and chairman of the World Gold Council, was named an officer of the Order of Canada, and is now the CEO of Fireside Investments. According to Lassonde’s well-credited predictions, gold prices may reach $2,400 by 2028. After the conflict between Russia and the Ukraine weaponized the U.S. dollar, Lassonde suggests a dual system of currency could emerge worldwide where global forces rely on gold more heavily than ever before.
“I think in the next five years you will see a dual system of payment and currency,” Lassonde explains in an interview with Kitco News. “What’s precipitating [this] is essentially the Russia-Ukraine war… To my mind, over the next five years, you will see $2,300 to $2,400 gold because of that.”
As geopolitical tensions around the world increase, numerous central banks have increased their gold reserves more than they have in the last 55 years. According to the World Gold Council, central banks purchased a collective 1,136 tons of precious metals in 2022, exceeding any total purchase amount since 1967. The gold buying level alone is the highest it’s been since 1950, breaking a twelve-year streak of net gold purchases.
The de-dollarization trend entering 2023 displays even more momentum. In January, the People’s Bank of China purchased 15 tons of gold, pursuing a three-month trend of stockpiling its reserves. In December 2022, China purchased 30 tons, and in November the nation’s central bank purchased 32.
“Emerging markets central banks, on average, have something like two-thirds of their reserves in dollar-denominated assets and less than 5% in gold. And they want to change that ratio. They want fewer dollars, and they want more gold,” the vice president and chief gold strategist at State Street Global Advisors, George Milling-Stanley, explains.
In the last quarter of 2022 alone, central banks purchased 417 tons of gold, showing the most aggressive purchase rate in the last 55 years. Central banks are buying more gold now than during the 2008 recession, the Iraq War, the Cold War, the Afghanistan War, and many other major geopolitical tensions.
What is the reason behind this gold-buying frenzy? Central banks want to move away from fiat money toward a more reliable, stable, and valuable asset that will appreciate when other asset classes fail. As we progress through 2023 and continue to see climbing inflation rates on a global scale, poor stock market performances, currency wars, debt crises, and questionable political affairs, more central banks want to prevent total catastrophe by protecting their wealth with de-dollarization.
Lassonde believes major nations want to move away from the weakening U.S. dollar to reserve their currencies. “These central banks are buying gold as a reserve currency,” he explains. “Will they use gold to back a new currency? We don’t know… What I do believe though is that at the end of the day, you will end up with a dual world in terms of system of payment and the currency you pay, and that is not good for the dollar.”
BRICS nations, including Brazil, Russia, India, China, and South Africa, want to become more independent, reduce dependency on the U.S. dollar, and prevent the United States from influencing their internal affairs.
“Particularly China, but [also] Russia, India, and some other countries are in the process of creating a dual system of payment, of currency, to counteract the U.S. dollar,” Lassonde explains. “The fate of all reserve currencies is to go down, simply because of a balance of payments. When you can write an unlimited check, what do you think happens?”
Lassonde firmly believes a recession and stock market crash are coming in 2023. While this may sound like bad news, the resulting ramifications on gold prices are an exciting side effect for investors. When the economy suffers, people flock toward gold.
“I think you’re going to see the U.S. economy enter into a recession in the next two quarters, and it’s going to be a fairly significant recession,” he explains. “All the forecasts are overstating earnings. They’re going to come down, and with that, you’re going to see the S&P come down by about 30 percent.”
Lassonde believes the Federal Reserve will attempt to lessen the recession by lowering rates, though they won’t do so fast enough. As a result, the U.S. dollar will drop even more, allowing gold to continue rising at exceptional rates, particularly gold equities. Ultimately, Lassonde predicts gold will climb to $2,400 in the coming years.
