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Rick Rule on KWN.

Today one of the wealthiest people in the financial world spoke with King World News about the incredible lessons the last 14 years has taught him about gold and the major markets. Rick Rule, who is business partners with Eric Sprott, also discussed why he is so bullish going forward.

Rule: “It really has been the strength in the dollar that has been creating the weakness in the metals recently. I believe the strength in the dollar is way, way overdone at this point. I continue to believe that the simple arithmetic is on the side of the gold trade and not on the side of the dollar trade....

“It’s also important to note that in times like these you have to be a contrarian. This has meant that we are a victim in the short-term as the sector has not yet turned, but in the long-term we will be the primary beneficiaries as the situation reverses dramatically in favor of gold and away from the dollar.

The truth is that big moves always take place from times of absolute pessimism. Over the weekend I was thinking about the striking similarities between what we are going through now and what we had to endure in 2000. I remember in 2000 having to write a position paper for my clients called ‘A Case For Gold.’ People who wanted to be long the gold trade in the year 2000 needed to visit a variety of psychological excuses to do so.

People should also note that back in 2000 there were some striking similarities to now. We had a very, very strong U.S. dollar and very strong U.S. equities markets, particularly very strong tech markets. There was also a complete aversion to all trades that weren’t regarded as being long U.S. debt, long the S&P 500, or long technology, and we all know how that ended. We know how it ended with regards to the major markets and the U.S. dollar as well as the trade for gold.

It’s interesting that in periods like we were seeing in 2000, with gold at $260, there was no interest in gold. But 11 years later when the gold quote crossed $1,900, everybody, including Goldman Sachs, said that gold was going to be substantially higher. Of course nobody wants to buy the bottoms and nobody wants to sell the tops. Where are we now? I don’t know but I suspect we are extremely close to the bottom.”

Rule also added: “I think the other thing that I need to add is regarding the broader natural resource theme, Eric. If it’s true that the Western world, the United States, Canada, western Europe, and Japan, are in recovery, and I’m not saying they are in recovery, there are tremendous plays to be made in the other out of favor commodities. This would include things like oil which has fallen substantially in price. Or more particularly coal, which has been halved in price.

With regards to copper and the various base metals, I am not saying that we are in the throes of an economic recovery, but an economic recovery is the justification that is being utilized to substantiate the trade in the U.S. dollar and the trade in the S&P 500. And if we are going to have a real recovery, I mean a recovery that includes things like jobs and a real increase in disposable incomes and capital goods investments, then the stuff of capital goods, meaning natural resources, will do extremely well. This isn’t a suggestion to your readers that we are in a recovery but if we are, don’t disregard the basic building blocks of a recovery, in particular energy.”