Vancouver mining mogul Frank Giustra. (Michael Falco for The Globe and Mail)
'If I'm wrong ... I will sing Patsy Cline'
Gold's 12-year bull run is not over, according to Vancouver mining mogul and
philanthropist Frank Giustra, despite the severe price correction the
precious metal suffered this week.
Mr. Giustra, who has amassed a fortune through a series of junior mining
deals, including the creation of the company that is now Goldcorp Inc., said
he is now considering switching his gold investments from exchange-traded
funds to major gold-mining companies and is willing to endure humiliation -
in the middle of downtown Vancouver - should his call on the commodity be
"If I am wrong, if this gold bull market is over, I will stand in the centre
of Robson Square and I will sing Patsy Cline's So Wrong wearing ladies'
underwear," Mr. Giustra said in an interview this week.
Gold has fallen about 14 per cent this month and plunged 9.3 per cent on
April 15, the largest one-day drop since March, 1980, according to data from
In spite of that selloff, Mr. Giustra is confident the yellow metal will
rebound because central banks in North America, Europe and Japan are
continuing to "print money" through asset purchase programs known as
quantitative easing. Despite years of tepid increases in consumer prices,
Mr. Giustra insists that inflation is poised to kick in as a result of
global monetary policy decisions that have pushed interest rates to historic
"Nothing has changed on the fundamental side ... the behaviour that caused
this gold market in the first place is just intensifying with all this money
printing that's going on around the world now," Mr. Giustra said in a phone
interview from the Vancouver airport. He was about to board his private jet
for a flight to New York to attend a meeting of the board of trustees of the
International Crisis Group, an independent international non-government
organization committed to preventing and resolving deadly conflict.
Mr. Giustra called the recent plunge in the gold price and gold mining
stocks a "correction and a pretty severe one, but not unheard of." The
Vancouver resident, who counts former U.S. president Bill Clinton as a close
friend, said the price of gold corrected by 44 per cent in the mid 1970s
before it went on to hit a then record of $850 (U.S.) an ounce in 1980. Gold
hit an all-time high of $1921.15 in September, 2011, according to Bloomberg
During what has been called the "commodity supercycle," Mr. Giustra made
hundreds of millions of dollars for himself and his associates by assembling
mining properties and management teams and taking the assets public on the
Canadian stock market using dormant shell companies. He created gold, oil,
copper and uranium mining firms. Two years ago, he bet that the beaten-down
junior mining sector had bottomed out. He was incorrect.
"I thought it was cheap two years ago. Oh my God, look at it now," he said.
Mr. Giustra said he is still "heavily" invested in gold, real estate and
farmland. He continues to buy art and is holding plenty of cash to be ready
to invest once what he deems a deflationary period comes to an end.
Gold has traditionally been seen as a store of value and a hedge against
inflation. Mr. Giustra conceded that consumer prices in Western countries
have not risen significantly, but he said there has been severe inflation in
the price of certain assets such as real estate.
"We haven't seen inflation in the classic sense ... but you have seen
inflation in the form of asset bubbles. If you look at the S&P [500 index]
right now, I think that is partially an asset bubble caused by easy money.
It's easy money that is driving the S&P to all-time highs, not actual
economic conditions or earnings," he said.
In 2003 and 2004, Mr. Giustra began selling his stakes in senior
gold-producing companies and buying physical bullion and exchange-traded
funds in Switzerland that are backed by actual gold. Now he's considering
reversing that trade.
"For the first time in almost 10 years I'm seeing a disparity in the price
of gold and gold-mining companies that I'm starting to think of doing the
switch from ETFs back into certain gold miners," he said.