RW: You called a bottom on February 21.
RW: We’ve been bombarded with negative sentiment regarding gold. Where is it coming from?
BM: It actually feeds on itself. Have you read Nate Silver’s The Signal and the Noise?
RW: I’ve read several reviews, but I haven’t read the book itself.
BM: You should read it because the guy is brilliant. As a matter of fact, the very best investing book ever written is probably Extraordinary Popular Delusions and The Madness of Crowds. I went to Southern Methodist, and they had less required books to read, so I read it as a sophomore. Essentially, it says that whatever people do they’re always wrong. In simple terms, when everybody is negative, there are no more sellers left, only buyers.
Last August, I went to Australia, and there was a guy on the trip who manages probably a $500-million fund, and he was getting into a deal in Africa and needed $30 million cash; so he started to unload. He was finding it difficult to do because for a lot of reasons the market has been ugly in the last 1.5 to 2 years. For the last month, believe it or not, the reason gold and silver went down was because Eric Sprott and Frank Holmes were dumping shares like crazy because of redemptions.
So it wasn’t magic or people negative on the market; it was because they were getting redemptions. So it fed on itself, and it will feed on itself until you have a day of total capitulation. I think that Wednesday of last week was the day of total capitulation. There simply were no more sellers left.
RW: Who is investing in gold, not physical gold but paper gold? How broad or narrow is this market?
BM: It’s pretty narrow, and that’s a big factor. There are too many companies out there, too much money being squandered, and the hedge funds have all backed away from the industry. It’s been pretty dismal. I think we’re about to go into Phase 3 of the market, and I think the public is about to get involved, which means gold will go to heights that no one ever dreamed of before. I’m not saying that’s necessarily a good thing because it will be a blowoff top.