The following is an interview of the International Business Times with Jonathan Rose, who saw the huge potential of gold as an investment already before the start of the phenomenal bull run during the last 11 years. After the first half of his career in Europe, working within established financial firms at the London Metal Exchange, Mr. Rose founded Capital Gold Group, Inc. in the year 2000 right at the start of the following five-fold price increase of gold.
IBTimes: Mr. Rose, could you tell us where you see the gold price headed to in the short and medium term? This is a big question for many especially regarding the new round of Quantitative Easing initiated by the Federal Reserve, also called money printing of course.
Jonathan Rose: After the impressive rally in precious metals over the past three months, we appear to have entered a period of consolidation where the next five percent move in gold and silver is likely to be led by gold on a break of the support at $1,315 per ounce or the resistance at $1,350. Now the Feds are approving the next round of quantitative easing and with the dollar down 13% since June, we are seeing a flight to safety and security in the yellow metal. With high risk of inflation looming, don't be surprised to see $1,400 an ounce by the end of this year. I think 2011 is going to start with gold continuing its upward swing and reach historical highs of $1,700 an ounce in the medium term.
IBTimes: QE2 is coming - will the liquidity glut and negative real interest rates further drive up the price of gold, or do you see this priced in by the market already.
Jonathan Rose: QE2 coming spells more economic insanity on the horizon. We spent over $709 billion dollars on the Iraq war. Politicians and economists said that would bankrupt us, but we continued to spend.. We have spent over $787 billion dollars on the first round of quantitative easing with little or no effect. Government census is that one in seven Americans live in poverty. Foreclosures are on the rise and are setting new records. Sheila Bair, the head of the FDIC, announced last year 140 bank failures, which could finish even higher this year. We also have a lack of funding for our entitlement programs, such as medicare and social security, which could be bankrupt in the next ten years unless we get further government bailouts. Homelessness is NYC is up nearly 50% and GM sales are down 25%. Our national debt is becoming a threat to our national security because people are viewing us as weak. And with our debt coming to maturity in the next ten years, which we cannot afford to pay, printing money seems to be our only option, which we feel is going to spur inflation, if not hyperinflation. We also feel if we adjusted gold for the inflationary highs of the 80's, gold bullion should already be at $2,200 an ounce, so we feel very strongly about a further drive up in gold over the next five years.
IBTimes: Some bullion dealers in Germany were sold out earlier this year, confronted with an unprecedented buying stampede. There are also comments about delivery shortages for selected U.S. coins. How is the situation now with the recent surge in demand? How is Capital Gold Group coping with the demand, do customers need to expect longer delivery times for certain products? Please let us know your expectations for the future as well.
Jonathan Rose: With the continuing surge in demand for gold bullion products and limited production of coins coming from the U.S. Mint, many smaller gold dealers are feeling the pinch. Capital Gold Group's expansive network throughout the globe enabled us to provide our clients with prompt delivery of gold bullion products. However, with the diminishing quantity of certain coins, we are witnessing an unprecedented rise in premiums on particular gold products. It's important that customers deal with reputable gold dealers to avoid long-term delays in certain gold products. We offer insured gold delivery for up to 100 million dollars and clients can also come into our office, pick up their gold and take it home with them.
IBTimes: About the portfolio structure, what share of investment would you advise investors to hold in physical gold, precious metal ETFs, and mines?
Jonathan Rose: In terms of portfolio insurance, no matter what size portfolio you have, I always recommend to my clients to diversify anywhere from 5 - 25 percent of what they have in paper into precious metals. I have to say I am more an advocate for physical gold as you're holding onto tangible wealth with no counter party risks. In terms of gold mining shares and ETF's, even though they are gold backed products, paper gold cannot be redeemed for gold. Only gold is worth gold.
About Jonathan Rose: As Founder and President of Capital Gold Group since its inception in the year 2000, Mr. Rose has an accomplished background in the base metals market, precious metals market, and the foreign exchange market (FOREX). While living in Europe, he spent the first half of his career employed by AAA rated banks such as Prudential Bache Securities, Morgan Stanley, Fimat Metals - a division of Societe Generale, Merrill Lynch, and other global firms on the London Metal Exchange (LME), negotiating with traders in the base metals markets.