Given the political and economic environment that we’re in, gold should be much higher, said E.B. Tucker, author of “Why Gold, Why Now.” Tucker had predicted gold to hit $2,500 an ounce by year-end of 2020, he is now updating his views and sees the price to hit that level by next year.
We're going to talk about the economy, the future of America, and much more. We're going to start with gold and silver. So I've been getting some comments and emails about your call about $2,500 gold and silver $40 by the end of the year, when the new year happened January 1st. Uh, what was your initial reaction to the price of both of these metals?
Well, what's, what's interesting, David is if I, if I, a couple of years ago, Said to you, let me paint a picture for you. Uh, we've had our second round of transfer payments to people that make less than a hundred grand in the U S and they used that money to buy a penny stocks and Bitcoin. And then the us Capitol building has been overrun by protestors.
Someone was killed and, uh, things are on fire. And, uh, we're financing three and a half trillion dollar us deficit at 0%. What's the gold price you would have you would've probably said, I don't know, three or 4,000, you know, or something like that. And we're, we're kind of stuck here too. So, uh, good point.
Look, I mean, yeah, we, we, we, we've been kind of scratching our head, watching the action. I mean, yesterday you're at 1950, then you're down to 1900 and then. Now you're 1920. I mean, there's a lot of there's a lot of, uh, day to day kind of take out volatility is what we call it and you see straight down, straight up, you know, and a lot of people that are speculating.
They ended up in trouble. Uh, you know, I've got a couple of coins right here. This is a Buffalo fact. Someone actually gave this to me. He's probably watching the interview. It's a good friend of mine in Colorado Springs. That's a Metalla shareholder. You know, we, we exchanged coins. Um, he sent them to me, but yeah.
There's nothing like having gold it's off the grid. It's it's, it's out of the reach. I mean, nobody knows this coin is sitting right here. It's just there. It's not connected to anything. And I think as we move further down this path, people are going to start realizing, hang on a second. There's something special about this gold that's that's off the grid.
It's real wealth. It's money. It's not an investment. Tell people that they get very upset, but in my book, I tell them it's not an investment. It's money. It's an asset. Metalla is an investment. I've got a Mattel hat because the stock was up 128%. Last year, we printed up some of these hats. They're really nice.
And gold was up 25%. The stock was up 128%. That's an investment. Okay. So when you look at gold, you don't want to be speculating saying, okay, I'm going to bet heavily that Gold's going to do this or that. When we say it's going to go to 2,500 this year. You know, how are you going to play that? Are you going to buy a coin for 2000 and sell it for 2,500?
Or are you going to buy a royalty company that has thousands of ounces in the ground? And when it goes to 2,500, all the value of those ounces gets pulled into today. Here, here's my theory, Eby. And you can correct me if you think I'm wrong. I think gold eventually will hit 2,500, maybe this year, maybe next year, who knows, but what we've seen over the last couple of months, if you take a look at the gold price chart is.
A high around August and then a decline, a steady decline until maybe November. And then we've saw a bounce back into, into the, uh, $1,900 range, which is where we are today. So. You know, my, my, my, my suspicion is that a lot of people, institutions, retail, investors, whatever the case may be, we're taking their profits off of their August highs.
And then as a vaccine rolled out, optimism kicked in sector money rotation. Kicked in people allocated more money into risk assets. And then now we're starting to see a bounce back into gold. So, uh, it could be, that could be right. But the one thing I want people to see is that gold is a $12 trillion market.
Okay. So this is not like crypto, that's a $1 trillion market. It's very different, you know, as you know, um, I think crypto is very interesting. It's not the same as gold people say to me is, is, is goal is, is Bitcoin digital gold. And I say, no, it's not digital gold because gold is not physical Bitcoin. Okay.
So you got to separate these two things, right? So when you look at the gold market, David, the gold market is very big. It's very institutional countries, Kings, you know, wealthy families own gold. Okay. So the gold market tends to move up to a new level and then chop around and, and take money from speculative traders.
Okay. That are trying to gamble. And then once it's done, it moves to another level. You notice that it was, did that at the 12 1300 level, did that it's a 1500 level, did that at the 1900 level it's sitting there now it's going to move up to another level and it's going to do the same thing again. So what I encourage people to do is to say, okay, how are you going to play that?
You're going to play that by buying tons of futures, contracts, and options, and borrowing heavily and taking a second mortgage to bet on, uh, GDX uh, options or something like that. I mean, that's pretty risky. Okay. But if you look over time, this price moves up commensurate with destruction of your wealth in traditional government money.
And so when people look at it like that, I think it makes a lot more sense. 25% for gold last year. I mean, since when is 25%, not enough. I mean, what are people's other investments? I mean, Mattel 128%. That's different. But think about this. We live in a world where the bank pays zero. And the gold goes up 25% and people are upset.
It's a really, it's really strange times. So what is a price that makes sense to you this year for gold? As soon as the grinding is done at 1900, you pop up into the low two thousands and you hit 2,500 next year. We were surprised that the rally to August didn't carry on. You know, we felt like some of the fundamentals were in place for it to carry on, but we underestimated the, the pullback, but we, we see, as soon as we're done at 1900, you notice we haven't made a new low, you know, the low was in.
Was earlier in the fall and we haven't made a new low, so it's continuing to make higher lows. So, so that's what you watch on the chart. The pullback caught a lot of people off by surprise. One of the theories that I've heard was that Bitcoin was stealing gold Stender and people have compared Bitcoin and gold.
You brought a good point. If you put the two charts side-by-side it does seem like capital floated to Bitcoin away from gold. Now I, I have, uh, you know, I have my doubts. What, what are your thoughts? Okay. So Joe, Gold's over $12 trillion market and Bitcoin, you know, we'll have to check it minute by minute because it's moving that fast, but let's just say Bitcoin is a 700 to $750 billion market, you know, and, and again, you've got to realize that these two things are not interchangeable.
You know, it's not, you know, Bitcoin is not digital gold. Gold is not physical Bitcoin. Okay. So they're different. They both have. Important properties. Okay. Uh, people are treating Bitcoin as a, as wealth storage. Maybe that's true. Maybe it's not true. I think over the long run, they're going to be surprised that Bitcoin is, is far more on the grid than people realize.
Okay. That's up to them to discover, but I'm, I'm not so sure that you can say that dollars coming out of gold and going into Bitcoin. I'm not, I'm not sure that works. I don't think it holds up under analysis. And I also don't think it matters. You know, when you look at gold, you know, if you read in my book, we talk about how much gold should I own the number one question people ask, and we give you a formula to kind of figure out what's right for you.
It's really small amount actually. And the same could go for people that say how much Bitcoin should I own? You know, I get asked this question all the time and I say, well, have you bought, no, I want to know about it. You know, it's by a gold coin, you know, by one of these right. Buy Bitcoin, you know, what could possibly go wrong?
So, so I think people, people are ideological is my point. They're getting into this ideological framework around Bitcoin that that starts, you know, the, to the guy with a hammer. Everything's a nail. You know, you look at the gold price as a correction. And I say, as soon as there's a big point, no, it's not because of Bitcoin.
It's not, it's two things are mutually exclusive. And if you see that you can make money off both. If you don't see that, you're probably going to just speculate and gamble and lose money. Surprised at how conservative you are with your forecast today, because let's go over the drivers of gold by monetary stimulus is still in place.
Negative, real interest rates are still here. Uh, the economy is still in, uh, in shambles in most, uh, by most definitions, uh, recovery is underway, but, uh, it's not happening right away. Uh, what else am I missing? Inflation. Yeah. Yeah. Okay. So I'm going to, I want everyone to pay close attention to what I'm about to tell you, because five years from now, you're gonna look back and you need to see that.
That I was telling you something very valuable. Okay. The fed has a 2% inflation target. You hear this all the time. They go on television 2% too, by the way, fed chairman never used to go on television. You know, when I was a kid, you wouldn't, you wouldn't even know who the fed chairman was. Okay. So, so now the old television, 2%, 2%, 2%, and we've been below 2% inflation.
So they're going to let it go above 2%. So they're going to let it go 3%, right. And they're going to say, well, we were 1% below for so many years, we're going to go 1% above. So 3% inflation. But really if you're, if you're really woke, you're going to know that that's not right, because the way they calculate it, excludes certain items is really going to be 5% inflation.
And so you're going to have 5% inflation that they call 3% inflation. That's meant to be an overrun of 2% inflation and all that's going to be happening at the same time that the economy grows at say three or 4%. Okay. So what do we know from economics? That's actually shrinking because if you're really inflating at five and grilling at three you're shrinking.
And so the next few years, David, the average person is going to make a higher minimum wage. Okay. So they're going to make about a dollar more per hour every year. They're going to think this is great. I'm going to be making more money, but then slowly, everything that they do is going to cost a little bit more.
Okay. Taxes are going to be a little bit higher because taxes aren't on the rich. Believe me, the rich have means to get to structure things, to get around taxes, to some degree, to minimize the impact. Okay. The poor people don't have that. Taxes are going to go up on the average expenses are going to go up on the average.
Okay. And the value of your money is going to go down and it's going to take you some time to figure this out. This is exactly what they engineered after world war II to heavily indebted countries. It's exactly what they're trying to do. Now. It's a passive, uh, way to get rid of some of this debt that people aren't going to be upset about until later if you're a politician, you love that.
And if you're a fed chairman, it gives you control of the system. While that's happening. It's a very, very important concept. I hope everyone listening will realize it's not too complicated for you to understand. In fact, in my book, we break it down even in an even more simple format. And there's something you can do to get ahead of it.
Is that, is that okay? Does that apply to private debt as well? Let's say I'm not even doing on a corporate level, but like, you know, on a, on a retail level, if I go out and max out my credit card now, is that a good idea? Well, the most credit cards, I don't have a credit card. I mean, I have an American express, so, so I'm not sure what the interest rates are because you have to pay the bill every month.
But the most credit cards from what I hear, they have like 20% interest rates. So it's going to be. Really hard for you to find something that inflates it more than 20%. I mean, you know, some things do, but I don't think that's a good idea. Now, let me say something about personal debt, because probably in the future, write a book about personal people have asked me to do this personal money, but debt is very difficult because when you have debt, you, you shrink down your frame of view.
It gets very small. It's like a horse with blinders on you, miss things. And so and so to, to go out and buy something. Borrow the money to buy it. You gotta be really sure that it's going to increase in value. Okay. So, so if you could do that, then you can take that debt. And then the appreciation slash devaluation will give you extra, an extra boost on your investment, but the dangerous it's very dangerous.
Because if you do that on the wrong asset, you'll get trapped. So say you took out your credit card and bought a Bitcoin. Okay. Was a really good idea, right? Because it worked out, let's say you did that and you bought ripple. It didn't work out so well. So you have to be careful because you can, you can buy the wrong asset.
That's the danger. If you buy the wrong asset, then the whole plan is foiled. And so from, for, in my, in my experience, it's, it's, it's better to leave that alone and find another way to play it. See gold captures the devaluation of the money. Last year, it was up 25%. Gold is not really any more valuable. I mean, look, I got a gold tooth here.
I think I've told you this, I got a gold tooth put in. It's more expensive. Okay. But the Gold's is not really more valuable. It just takes more dollars to buy it. So the gold is not an investment. It doesn't become, it's not like with Metalla where the company's royalties grow because the mining companies that are operating on them find more gold.
That's an investment. So gold doesn't doesn't do anything. It's well, that's money. It's it's currency. It's another form of cash. Okay. And why do you need that? That sounds exactly like Bitcoin DB doesn't do anything. That's what I'm saying, except for Bitcoin. That's why, that's why I'm not negative on Bitcoin.
In fact, I think it will go quite a bit higher in price, but I think what people miss about Bitcoin is is they, they think that it's this like hidden off the grid currency. That's something that they miss about big. And it's like, you guys, I hate to tell you, but the, the kid that hacked all those Twitter accounts and got Bitcoin's ransom money and he was in Florida last year, they trace that Bitcoin, it found the kid, how do they do that?
How do they do that? It's totally traceable. So, okay. Once you understand that, You're good to go. Okay. You can, you can, you know, understand your, you got to understand your investment, David. That's the problem. You can't go around like an idea. Like Goldbug everybody gives you a hard time about being a gold bug is because goldbugs got a bad reputation for running around and shouting at people about how you're going to be using gold to buy groceries.
They just completely missed the picture. It's not like that. How much gold should we own then? Can you share your formula with us? Yeah, so, so in the, in the, in the, obviously I'm not a financial advisor, so I don't give personalized financial advice, but in the book I break down this equation where I start showing a real example of a number, like a 2% or 3% of net worth and what that looks like.
And so when somebody looks at 3% of their network, they might say, they're worth a million dollars, 30 grand in gold. And they say, well, that's not that much. And it's like, well, yeah. I mean, how much fire insurance do you need? You know, not that much. I mean, it's, it's, it's, it's gotta be proportional. And so I think when people start thinking about things in terms of a formula, they start realizing that you can get your gold exposure, you can get your crypto exposure.
And these don't have to be obsessive trades where you're checking them in the middle of the night and. You know, reading Reddit, blogs about them all the time. And do you know convincing, arguing with people at family dinners about them? No, no, no, no. You get your position. You make sure it's something that works for you and doesn't keep you up at night.
And then you move on. It's not a big deal. And if you do that, you end up making more money because you could think clearly is that dependent on your personal risk tolerance? So let's say, you know, you hear that the younger person or a younger investor should have more risk or could have more risk and therefore.
Less need for a safe Haven asset. As you get older, near retirement age, you should do the reverse. I don't know. Do you agree with that? Well, Oh, okay. So look so, so yeah, but you want to, if you're a younger person, you want to take risks in, in, in, in investments. Okay. So like Bitcoin is not an investment.
Gold is not an investment. These, their assets, assets and investments are different. So if you're betting and you're speculating on the price of Bitcoin, that's fine, but don't call it an investment. Call it an asset that you think is going to rise in value. An investment would be like in a royalty company.
So royalty companies, people don't understand royalty companies, they get this wrong, even on Kitco all the time. A royalty company gives you the chance to speculate on the metal price without owning an operating company and without having to have a futures contract and take on leverage. Okay. That's a very unique feature of royalties now.
If you're young and you wanted to take risks instead of putting 97% of your wealth into a Bitcoin or something. I mean, I would say like, look, you know, you can have your use my formula in the book. You can have your gold, you can have your crypto, you can have operating businesses that you own that are going to grow.
So look at businesses in the crypto space, businesses in the gold space that have improving business conditions. When the asset price goes up. Does this make sense? Let me tell you, suppose corn was going to go to $12 a bushel. What would we do? We will buy the biggest farm possible. Okay. So, and we would grow as much corn as possible because we thought we were going to sell it for $12, you know, instead of $4.
Okay. That's what we would do. That's a business. So, so the economics of that business get better as the asset price goes up. That's how people need to think about this. Instead, they spent all day. Trying to argue with people about what the next crypto coin to buy or something, but it's like, listen, I don't care about Iowa corn, you know, versus Kansas corn.
If the corn price is going up, I want to be in the corn business. Loyalty companies misconceptions around those. Can you, can you clarify those misconceptions for us now? You met, you mentioned just now that golgi companies have unique attributes. So my, my question is why, why invest in royalty companies?
Why not just invest in the metal because it doesn't, you know, what, why, why go through that extra layer of management? Okay. So a royalty is, is a free interest, a free carried interest and a mineral asset that's that's free of dilution and free of, of operating risks. What that means is, is that 1% of the gold there's an ounce of gold, 1% of all the gold on a property.
Okay. Is is belongs to the royalty company now and forever a hundred years from now, regardless of who's in business or whenever. So the difference is, is that if that company finds more gold on the property, you know, if the gold price goes higher, you capture all those benefits without having to invest any more money.
So the problem is the gold is that if you buy too much gold, okay. So last year you bought too many of these and you made 25%. And you're happy about that, but Metalla has got 62 royalties. Okay. So they have thousands and thousands of ounces of gold in the ground that are going to come out in the future.
And every single one of those ounces is worth 25% more. Okay. And you capture that value today. So what happens is it gives you this exposure to a much larger pool of future gold production at higher prices today. And that's why. With gold at 25% Mattel up 128%. So, so royalty is, is a way to leverage yourself to higher metal prices without taking on actual leverage.
If that makes sense. Whereas in the futures market, you're having to take on lots of risks. If you have a short-term dip, you're in big trouble, you have too much leverage. You borrowed too much. You're in trouble. With a royalty company. It's not like that. You have the, if the royalty company is doing it, good job of acquiring assets.
Okay. And that's what people don't understand is that the, when the royalty company, you actually don't want the royalty company to be gushing profits today. You want them to have gold. That's going to be coming out of the ground over a long period of time because of the gold price is going to go up 25%.
The ounces you produce last year, went out the door, 25% less than they're going out the door this year. Okay. So you'd rather see gold production next year or the next year or the next year. And not as much today and people, people generally miss that. All right, Amy. Thank you so much for coming on the show today.
That was fantastic. Thank you for your thoughts. Thanks, David. And we'll talk soon. We'll talk soon for sure. Absolutely. Thank you for watching Kitco news. I'm David Linn. .