Bullion or Certificated Bullion? He Owns Both: Rick Rule

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While he owns both bullion and certificated bullion, many investors are better off buying bullion says the founder of Sprott Global Investments Ltd. and president of Sprott Asset Management USA Inc. in an Ask the Expert interview with Sprott Money News.  Certificated bullion may be more convenient while bullion provides assurance that one has the actual good, rather than a promise.

Listen the interview here:

Ask The Expert – Rick Rule

Transcript:

Sprott Money News (SMN): Thank you, listeners, for joining us today on Ask the Expert. My name is Neal Ohm with Sprott Money News. We’re very excited to have the pleasure of speaking with Rick Rule this morning. Rick Rule has been involved in the securities industry since 1974, and is a respected retail broker and investment manager in the United States.

With his expertise in mining, agriculture, energy, and water utilities, Rick has built a reputation for getting his clients involved in global investment opportunities in various resource industries. Rick is the founder of Sprott Global Resource Investments, Ltd., an independent broker dealer, and president of the Sprott Asset Management USA, Inc., a registered investment advisory firm.

Both companies are wholly owned subsidiaries of Sprott Incorporated, a large natural resource investment firm in Canada with over $10 billion in assets under management. For information on how to invest with Rick, email Rick and his team at contact@sprottglobal.com. With this, I’m pleased to welcome Rick Rule this morning. Hi, Rick.

Rick Rule: Hi, how are you?

SMN: Great. We’re just going to get right into it. Let’s assume the US government has leased out all of their gold reserves. Does this mean that the actual physical gold is still located in the US under US government control, but true ownership, as evidence by the lease contracts, or is it held as a paper promise by non-US government parties?

RR: I think the truth is that either of those could be true. That’s something that we would probably be better off asking an attorney. But there’s a whole variety of situations which can take place. The gold trade at that level is fairly opaque, and there’s a wide range of contractual opportunities available to gold lessers and vendors.

I’m not suggesting, as an example that the questioner was asking, or I think assuming, that the US government had in fact leased out their entire holdings. That isn’t anything I’m suggesting. But there really are a wide variety of alternatives available to them.

I think the questioner is supposing, or is asking the question as to whether the US government actually has the gold, or, in the event of a financial meltdown, would become an unsecured or semi-secured creditor. I don’t have an answer to it, but I think it’s a very relevant question.

SMN: So, with that in mind, what would prevent the US government from declaring a state of emergency and reigning on all their lease contracts?

RR: The US government has shown through time that they can do pretty much whatever they want. I don’t think there’s anything necessarily, other than the commercial goodwill, which the United States government hasn’t been famous for over time, to keep them from doing that. In particular, the US government’s relationship with gold over time has been fairly schizophrenic.

The confiscation of private ownership would be one example. Backing off the gold standard, Nixon’s closing the gold window would be another example. The continuing frustration that private investors have felt with regards to Dr. Ron Paul’s efforts is an example. To audit the Fed, point to the fact that the US government and US central banking authorities relationship with the gold community has been opaque at best.

SMN: When was the last time Fort Knox was actually audited? Do you know that?

RR: I don’t think Fort Knox has been formally audited.

SMN: Yeah.

RR: I think they sort of declared a starting balance. But again, I’m no expert on that. Their resistance to an audit or any sort of oversight has been interesting.

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