Newmont Chief Sees Gold at $6,000

By Al Lewis • Business Editor, Denver Post

Newmont Mining president Pierre Lassonde forks over a $1 million bill. Visually, it's as impressive as any U.S. currency. It's even meticulously printed on similar paper.

On the back is a small inscription: "This certificate is backed and secured only by confidence in the American Dream." The line on the novelty note comes off as a joke. But Nixon uncoupled the dollar from gold in 1971, so maybe it isn't so funny.

Gold Rebounding

Lassonde smiles. We spoke last week after a weakening dollar put gold at a six-month high. Gold appears to be rebounding from a 20-year bear market that began with a war on inflation in the 1980s and ended with a war on terrorism and a loose fiscal policy that is now flooding the world with dollars.

Gold was $35 an ounce in 1970, peaked at $850 in 1980 and from there to nearly $250 in 1999. It's still bouncing around, but last week it was on the upswing at $375.

Gold to $6,000?

Newmont is rising with the tide, its stock up more than 200 percent since October 2000.

Lassonde, who has 60 percent of his net worth in gold-related investments, doesn't believe his luck ends here. As the author of "Gold Book, The Complete Investment Guide to Precious Metals," he can argue why gold might one day climb to $6,500 an ounce.

His arguments, though bold, are compelling -- even bearing in mind that he has every incentive to preach a bullish theology and that many financial experts believe average investors should put no more than 5 percent of their portfolio in gold.

Gold is the Ultimate Reserve Currency

"I call gold the anti-dollar," Lassonde said. "When the dollar is strong and acts as the reserve currency that it is, there is no use for gold. But when the dollar is weak because of fiscal and monetary policy, then the ultimate reserve currency is gold."

So with a rising U.S. trade deficit and a federal budget deficit that is financed with a steady flow of foreign cash, gold is behaving more like a currency than a commodity in Lassonde's view.

Global Politics Good for Gold

"The United States is sucking up 70 percent of the world's savings to live in the manner it's accustomed to," Lassonde said "This can't go on forever."

To be sure, the global politics of the American lifestyle, the intricacies of central bank policies, currency fluctuations and geopolitical events are impossible to predict. Also, a strengthening economy has the potential to turn the tide against gold.

But if you put these factors aside and consider gold as just a commodity, Lassonde has some more basic supply-and-demand arguments, too.

It Takes Four to Seven Years to Open a Mine

The 20-year bear market in gold has weeded out marginal gold producers and significantly curbed exploration and production.

"If gold was $1,000 an ounce, it still takes four to seven years to open a mine," he said.

Then, on the demand side, there is India and China. India, home to a billion people, is increasingly affluent, particularly as U.S. companies add jobs there instead of here. So Indians are buying more gold.

China, the Little Known Golden Opportunity

Then there's China, where after years of communist controls, the government is deregulating gold, allowing gold companies to have initial public stock offerings, creating a gold exchange and even allowing its citizens to buy gold at market rates.

That's 1.3 billion people who now are permitted to buy gold at market rates as they participate in their fast-growing economy.

"China by itself could become 40 percent of the entire gold market," Lassonde said. "That is the most important thing that's happened to the gold market in the last five years, and yet very few people have picked up on it."

A golden opportunity? Only time will tell, but it's an interesting thesis. Meanwhile, know that the lure of gold has made many millionaires and many paupers.