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I Feel Like The Federal Reserve's Lab Rat - John Hathaway

(Kitco News) - The Great Monetary Experiment, as a result of the 2008 financial crisis appears to be coming to a head and that will be good for gold as investors lose faith in paper currencies according to the manager of abillion dollar gold fund.

In an interview with Kitco News, at Gold Stock Analyst Investor Day, John Hathaway Senior Managing Director, Tocqueville Asset Management, said that gold, which is preparing to end its best month in recent history, is turning a corner as people become disillusioned with monetary policy. He added that the demise of paper money is now becoming the top reason to hold gold among investors.

“It’s been like four and a half years …and I feel like we are beginning to see some daylight here,” he said. “It seems to me, that we are maybe, at the beginning of a loss of faith in public policy, monetary policy, fiscal policy, politicians.”

Hathaway, added that the results of the Federal Reserve’s actions have left him feeling like a “lab rat” as returns on saving have deteriorated in a low-interest rate environment.

Although gold prices have made considerable gains since the start of the year, up more than 16% on the year, Hathaway said that he could see even more money pour into gold in the current market environment.

“Anybody who invests in gold, and is not a trader… feels that the long-term decline of the purchasing power of the [U.S.] dollar and other paper currencies is the principal reason for owning gold,” he said. 

Along with the growing economic uncertainty, Hathaway said that he is also optimistic on gold prices as the lack of physical supply is “greater than what most people think.”

He explained that the last few years, while paper markets have been driving the price down, physical gold has been flowing into India, Turkey, the Middle East and China.

“That gold gets refined into different bar shapes, different purities. You just can’t bring it back to the London or New York market and expect to trade it without a delay, in some cases very substantial,” he said.

While the $1 billion gold fund was purchasing the yellow as prices declined, Hathaway said that the firm is now looking to the mining sector as the price goes up.

“If the gold price continues to rally, I would expect better performance from the mining stocks,” he said.

As of 11:24 a.m. EST April Comex gold futures were trading at $1,233 an ounce, up $12.4 or 1% on the day.

By Daniela Cambone and Neils Christensen of Kitco News;,

Follow Daniela Cambone @DanielaCambone
Follow Neils Christensen @neils_C


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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