Gold – Simon Mikhailovich

Featuring Simon Mikhailovich

With his deep knowledge of both the gold market and the risks of financial repression, contrarian investor Simon Mikhailovich has a unique perspective on the shock move by the Indian Government to cancel 86% of its cash in circulation.

Simon theorizes the ramifications of the demonetization for the outlook on gold, as well as what he called a dangerous precedent for property rights and political freedom.

Published on
25 November, 2016
35 minutes
Asset class
Commodities, Cash


  • SP

    Sat P.

    26 8 2017 04:12

    0       0

    My key learning from this interview was around a structure to hold Gold under Property rules instead of financial rules, never thought that could be done. This is one of the reasons for subscribing to Real Vision, to find out how the wealthy protect themselves which you'll never read about in a newspaper. Great interview.

  • SM

    Simon M.

    8 12 2016 20:53

    2       0

    John O, the concept of "deflation" needs to be reconsidered in light of today's realities. In this new environment, cash is no longer a risk free asset. e.g. USD is backed by nothing more than confidence and is no longer in limited supply, unlike gold and other hard assets. Also, USD cash can no longer be held outside the banks in size, i.e. the fact that a theoretical USD may become more valuable than gold presumes that one still has access to one's actual USDs. Purchasing power of USDs to which one has lost access will always be less than the purchasing power gold, which one still has. There are other factors as well, but the key point is that one ought to focus on the relative purchasing power of various assets and their impairment risks rather than on their listed prices.

  • JO

    John O.

    8 12 2016 12:17

    1       0

    I wish there were non-casino banks that would just safely store your money for a fee. Don't really want to buy real estate when it's way high, just to have something tangible when bust governments and crooked banks attack. Long physical gold is vital but bullion is not immune to deflation.

  • JO

    John O.

    8 12 2016 12:15

    0       0

    Safety seems to require you hold gold in multiple places (not in bank vaults and not in confiscatory countries) and hold cash notes outside the bank in multiple currencies (not just your local one). Now seems you are only safe with low denominaton cash notes!

  • GS

    GRANT S.

    8 12 2016 03:49

    0       0

    Andreas Antonopoulos brings this up in his latest bitcoin speech

  • cb

    chris b.

    7 12 2016 23:17

    3       0

    Alan Kohler is a flog, he always has been. His writing is random drivel that backs his multi-million dollar assets and his mates.

  • SK

    Stefan K.

    30 11 2016 22:59

    1       0

    China at the brink of collapse, Deutsche Bank as well, U.S elects President Camacho in real life and Gold is down more than 200 USD/ounce from its peak. Can anyone pinch me?

  • KJ

    Kulbir J.

    29 11 2016 06:30

    5       0

    I would also be interested what role Bitcoin plays in all of this and whether it is an even better investment that Gold, particularly if governments decide to 'demonitise' overnight

  • KJ

    Kulbir J.

    29 11 2016 06:26

    5       2

    The Indian demonitisation has not been given enough coverage. Instead we are bombarded with BS on financial media about the 'Trump Rally' and stupid OPEC meetings that never result in any cuts in production and other garbage.

    The Indian demonitisation will go down as a monumental day in our history. And the beginning of the end for cash.

    Cash is no longer King!

  • SC

    Sam C.

    29 11 2016 03:21

    0       1

    I have a small cap investment in Australia called TSN. They manage ATMs in india. I have been there for a few years all because it was clear Modi was bent on getting more $ into the banking system, co

  • db

    don b.

    29 11 2016 02:13

    0       0

    Please interview the brilliant Daniel Oliver of Myrmikan Capital LLC

  • SM

    Simon M.

    28 11 2016 19:25

    4       0

    Christian, FDR did nationalize privately owned gold but his order only had jurisdiction inside the US. The only way to manage such sovereign risk is through jurisdictional diversification. i.e. holding one's gold in different countries, especially those that have strong property rights and where gold is deeply ingrained in the culture of savings. Such countries would be unlikely to restrict gold ownership even if the US decided to do so. Without staging an invasion, no government, not even the US government, can gain control over private physical property located in different countries, without going through the local judicial process, which is time consuming. Ultimately, if one's gold is not within immediate danger, one has a chance to work out a solution or choose to comply voluntarily. This is much better than being subjected to compulsory enforcement without any ability to do anything about it.

  • PN

    Philip N.

    28 11 2016 11:03

    0       0

    A couple of disjointed thoughts on the money madness in India. First off it reminded me of when the North Korean's changed their currency; in that the governments of both countries didn't/don't seem to understand just what it is they have done and what the long term consequences may be. Next up the claims that it was kept secret. The Indian government had a large (granted inadequate) number of currency units created before the "large denominations" of currency were demonetized. It is hard to believe that this didn't at least raise some eyebrows. The answer to the question "why does the government suddenly need huge volumes of small bill?" doesn't seem that hard to arrive at. Where all this ends just seems dystopian.

  • SR

    Steve R.

    27 11 2016 23:57

    2       0

    I see Bitcoin is under attack from the US IRS.
    If you extrapolate Simon's thought process forwards, doesn't it just lead to a world where the criminals and tax-evaders will be the ones using Bitcoin? After all, if you want to ban cash, then you cannot by definition allow either gold or Bitcoin to become alternatives/substitutes that live 'outside' the system? People are drawn to Bitcoin because of its so-called anoymous element, but this is in direct opposition to one of the reasons for banning cash, i.e. to make everything more transparent and accountable. Its an interesting debate.

  • SM

    Simon M.

    27 11 2016 21:15

    2       0

    Vadim, when it comes to fine wines, you will hear no disagreement from me. I am glad we found common ground - in vino veritas!

  • vt

    vadim t.

    27 11 2016 20:10

    3       3

    Simon, thanks for the discussion!
    By the way I'm making fine wine investments as well, it has one advantage compared to gold, it's very consumable!

  • SM

    Simon M.

    27 11 2016 16:05

    12       0

    Vadim, if everyone agreed about everything, markets would't work. We do not know the future but we do know the past. In 2014 gold price in Rubles was 40,000 and now it is 76,000. Both dollars and gold did well protecting one's purchasing power, as ruble value fell. Same is true for India. I accept your skepticism about the timing and execution of the exit strategy. Having experience in distressed investing and full access to the global gold market, both of which I happen to have, help a lot but, yes, I agree that nothing is 100% assured. Finally, gold has never failed to perform in extreme situations as a store of purchasing power. Even during the siege of Leningrad, which was as extreme as it gets, one could sell gold on the black market or barter gold for food. To conclude, I have drawn my conclusions and am doing with my own money the same as what I recommend to others - gold should be a part of Plan B. In the end, everyone should do what they think is right for them and those for whom they are responsible.

  • DR

    Dan R.

    27 11 2016 14:53

    2       3

    Not so sure things would go so smoothly should they try to ban cash in the US as we have the right to bear arms. This is one of the reasons our founders were so adamant about our right to defend ourselves and more importantly to own weapons so that if need be we can shoot our rulers. Our founders understood that the individual is more important than the collective. Hence, I prefer owning a few good guns and lots of ammo, real estate and cattle. Let "them" try to take it. We as individuals must stand up to the state. They will push and take until we push and take back.

  • vt

    vadim t.

    27 11 2016 11:03

    3       9

    Simon, as to Indians -NO, sorry, you are wrong! If they just had dollars it's much better, much more liquid, they'd be kings of the streets now.) As to insurance...
    Simon, the case is when "bad things happen" there is a chance that insurance doesn't perform as well. So things should be bad but not too much bad.
    Simon, when are you gonna change your "currency"(gold) to something else and what it'd be? Food, when there is blood on the street? You gonna be disappointed by an exchange rate, we got it in Russia many times. Other currencies? My point is there must be an exit strategy which you guys somehow have never discussed. I think that the exit strategy is the weakest point of "gold currency story", and by the way it turns "holdings of gold" into an investment or speculation by definition.

  • SR

    Steve R.

    26 11 2016 23:17

    5       0

    Very interesting interview. But, if you remove all cash from a large black economy what happens to all the people in it? Well, they could all start trading amongst themselves in gold?, or they could just all turn to more crime and just steal the things they no longer have the money to buy?, or they go to the government and say give us some welfare benefits?, or there eventually could be 'riots on the streets'? If people feed themselves based on the black economy and you take this away, how do they feed themselves? Banning cash is no majic bullet, and as I'm sure we will see over time, there will be a whole host of 'unintended consequences'? Could it be that eventually, the only people who trade gold are actually the criminals? Gold could become the criminals currency? Governments rely on the black economy to avoid huge welfare states, so will be very interesting to see what happens in India.

  • KS

    Kathleen S.

    26 11 2016 22:42

    3       0

    Got bitcoin?

  • SM

    Simon M.

    26 11 2016 22:01

    6       0

    Salvatore, you bring up a good point. At the same time, having to decide when and how to comply voluntarily is much better than being subjected to compulsory enforcement without having any options. All of the financial assets, bank deposits and cash are subject to regulatory fiat at any time, whereas portable physical assets, especially if held in different jurisdictions, offer a chance to find a solution.

  • SM

    Simon M.

    26 11 2016 21:35

    19       0

    Vadim, gold can be a speculation but it is not an investment. Gold is a global reserve currency; central banks and the IMF hold a portion of their reserves in physical gold. They do it because in extreme circumstances gold acts as the ultimate currency that does not require any government's backing. It is also the only physical asset that is globally liquid, can be owned outside the financial system and is at not at risk of impairment. Therefore, the reason to own it has nothing to do with the ebbs and flows of sentiment and price fluctuations. Insurance performs when bad things happen and they have not yet happened in the West. Indians who own phys gold are in a much better position today than those who hoarded cash.

  • CM

    C M.

    26 11 2016 19:19

    2       1

    To all you physical gold lovers out there, our scoundrel President, FDR, made physical possession of gold coin & bullion a criminal offense punishable by a $10k fine and 5-10 years in jail. You all can bask in your perceived smartness, but it can be eviscerated with the stroke of a pen.

  • vt

    vadim t.

    26 11 2016 16:40

    7       5

    Sorry guys, the same old song, how many more years are you gonna spend having such a conversation? Didn't you noticing an interesting pattern: events that are supposed to be great for gold turning out to be a disaster? It's worth discussing isn't it?
    The problem with your assumption is exactly the same. You're right all the way but when all things you correctly predicted start finally happening there is some non-zero probability (the question is how big it is) that the gold investment idea fails as well due to various reasons.

  • SD

    Salvatore D.

    26 11 2016 16:22

    3       0

    I enjoyed listening to Simon, however the price of gold is the same for physical and derivatives. Additionally if governments want to tax your assets mobile or fixed they will. You can run but not hide... wether you have physical gold in Switzerland or Hong Kong- unless you opt to go undeclared which is today a crime even in Switzerland.

  • MS

    Matt S.

    26 11 2016 14:22

    5       1

    The biggest threat to the world today is governments themselves.

  • WM

    Will M.

    26 11 2016 14:13

    9       0

    Very good discussion. Yes India took a decisive step although it is issuing new cash. The point is that government can now decide who has a suitable explanation (and presumably documentation) for why they have thousands of dollars worth above the rupee cash limits. That is the real issue here as bureaucrats with the law behind them can prevaricate and wield their pompous power without comeback. I agree with commentators below, since so many subscribers to RV have a bias toward gold ownership it would be good to get more discussion on strategies for precious metal ownership to maximize flexibility when the crunch does in fact finally drive.

  • GS

    Gordon S.

    26 11 2016 13:07

    0       2

    Great interview! On a side note: Why did Raoul recommend buying GLD in his latest interview for his pair trade "long dollar - long gold" when asked how to structure it? Not the way to go in my opinion! Can't repeat this often enough, we live in interesting times!

  • ST

    Simon T.

    26 11 2016 08:43

    2       1

    Incredible insight and clarity, i stick to my physical gold holdings, fine wines and good to own a piece of land in Switzerland or other real democracies

  • BR

    Boyd R.

    26 11 2016 08:22

    6       1

    Not sure we are any clearer on gold

  • TE

    Tim E.

    26 11 2016 07:44

    4       1

    The point on it being very possible for governments to ban gold is a significant one. Personally I keep my store of wealth in another tangible asset that is way lower on the pecking order for governments and bureaucrats to outlaw than gold, silver, and expensive real estate. But, each to their own.

  • T~

    Tshort63 ~.

    26 11 2016 07:13

    4       0

    Always enjoy Simon's thoughts and perspectives. What is becoming clearer that the mess is big and potentially imminent. Impossible to know when or if we should expect the unexpected but Praemonitus Praemunitus.

  • LA

    Linda A.

    26 11 2016 05:46

    4       0

    Always love hearing Simon's & Grant's perspective on economic events & gold. lol- Madam President. It feels like the stock mkt is an illusion (at all time highs) with misleading indicators (growth, employment i.e.) presented by the govt. Regardless of Trump's proposed stimulus plan, u can't keep printing to infinity w/o debasing the currency. The govt's motto should be ,"Desperate times calls for desperate measures" - negative rates, bail-ins etc.

  • MM

    MZ M.

    26 11 2016 05:25

    14       0

    when India's highly respected "rock star" central bank governor Raghuram Rajan stepped down I wondered what was going on behind the scenes and we may now have an answer....

  • HJ

    Harry J.

    26 11 2016 00:54

    8       0

    Ok, Good job Grant.
    What's the next thought on how to protect our gold?
    There must be a procedure to accomplish this beyond burying it in the back yard.
    Information like this makes me appreciate the

  • p5

    peel 5.

    25 11 2016 22:32

    1       3

    @ David Indian currency programme i do not think the motive is to reduce cash. Modi (PM of India) had made huge election promises to bring black money from overseas during his election campgain. He was not able to do much progress in that so is now targeting black money within the country. In this case his mistake was not printing enough new 1000 and 500 rupee notes. Now public are faced with problems because of this mis step. Everybody is rushing to bank to exchange their notes and there are not enough new notes. The benefit the non cash payments are reaping is purely because of short supply of currency notes

  • SS

    Steven S.

    25 11 2016 22:22

    1       6

    So let me get this straight, when paying my RealVisionTv subscription, what change can I expect from my 1oz gold wafer ??

  • rr

    rlw r.

    25 11 2016 21:02

    3       0

    Brilliant chat, well said well done.

  • DS

    David S.

    25 11 2016 20:51

    31       0

    With the introduction of the Euro, all(?) EU countries currencies were eliminated and everyone had to exchanged their former currency for the new Euro. This had a similar effect on hidden cash in Europe as it is in India today.
    When governments need lots of money, be very careful. Maybe we could have an interview with someone who has studied this and can give us strategies in addition to physical gold.

  • GS

    Greg S.

    25 11 2016 20:39

    14       0

    I recall a BCC film series called Game, Set, and Match. Bernard Sampson, the spy, tells his friend Werner " Eternal vigilance is not enough, it takes paranoia". I sense that we are getting closer to this state of affairs at a seemingly accelerating rate.

  • DS

    David S.

    25 11 2016 20:24

    6       0

    The US government has also eliminated many large bills from general circulation - $500, $1,000, $5,000, $10,000. For only internal government transaction there was even a $100,000 bill.

  • EK

    Emil K.

    25 11 2016 20:18

    3       0

    I appreciated the discussion on democracy, liberty and freedom in the context of the inevitable, ‘Well this affects just the criminals.’ / ‘If you’re innocent then you have nothing to hide.’

  • DS

    David S.

    25 11 2016 20:16

    6       1

    It is only a matter of time when many governments will ban cash and physical gold is a hedge against this day. But India is not there yet. It is issuing 500 and 2000 Rupee notes. This is not going well as one might expect, but larger Rupee bills will be in circulation at least for a while. It does, however, show how quickly a major government can change all the currency rules. Physical gold will have its day.

  • RS

    Rick S.

    25 11 2016 20:04

    8       0

    I always enjoy hearing Simon's perspective on the gold market...

  • BF

    Bruce F.

    25 11 2016 19:22

    12       0

    brilliant with incredible logic.