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Rick Rule says gold 'overpriced' near-term; still 'wildly bullish' long-term

Kitco News

The recent gold price rally may have gone "too far, too fast," said Rick Rule, president of Sprott U.S.

"I think [gold] might be, in the near-term, overpriced. The truth is that gold bull markets, historically, have been extraordinarily volatile. It wouldn't surprise me to see gold go to $1,900, it wouldn't surprise me to see it go to $1,650," Rule told Kitco News.

In the intermediate term, Rule maintains a bullish stance.

"If you asked me my gold price outlook over the two-year or three-year term, I'm bullish to the point of being wildly bullish," he said. "If you asked me my gold price outlook over the next two months, my suspicion is that it might have come too far, too fast."

Near-term price movements are typically determined by mass psychology, which is not always indicative of an asset's fundamental value, Rule said.

"[Warren] Buffet famously says in the near-term, markets are voting machines; they measure psychology. In the long-term, markets are weighing machines; they measure value. The value of gold relative to the U.S. dollar, I think in the next two to three years, can only go higher."

Rule considers gold as fitting his definition of a safe haven asset due to the metal's ability to provide liquidity and volatility simultaneously.

"I look at gold as volatility but good liquidity. So for me, in the context of the way I construct my portfolio, gold is a safe haven asset. There will come a time, when its price escalation relative to competing assets, will make it less of a safe haven. Ironically, at that point in time, more people will regard it as a safe haven because its price has gone up," he said.

Rule will be discussing more about the gold sector and the junior mining space at the upcoming 2020 Sprott Natural Resource Symposium.

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 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.