Which investors had a good year and why interest rates will probably stay low: Rick Rule

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You expect interest rates are going to stay lower for a while?
Rick Rule : I do. I think the recovery in the United States is overwhelmingly a function of low interest rates, and it's overwhelmingly a financial recovery.
There is some room on the individual balance sheets after four years of deleveraging, which means that we are seeing a bit of pick up in consumer spending. But what we aren't seeing is a pick up in individual income, and the idea that we can have a consumption led recovery without an increase in individual incomes seems to be problematic to me. And in the absence of really dramatic pick ups in consumer spending—and particularly spending in consumer durables—I don't see the types of investment in manufacturing capability or in capacity generated that would lead to increased private sector load demand.
The second thing is that while the global financial crisis of 2008 doesn't seem to have caused the government to be to cautious with their own balance sheet. The response by corporate America has been very different. Those balance sheets are absolutely financial fortresses, awash in cash. And I think their need to borrow has declined. Those two things are sort of the free market forces with regard to interest rates.
If you look then at the governmental forces I think the picture becomes clearer. In the first instance, very low interest rates—manipulatively low interest rates—of the type that we have now punish savers and reward spenders. And the truth is in a liberal democracy—a rich liberal democracy—there are more spenders than savers, so it makes sense that artificially low interest rates would be an expedient political decision for both parties. The second thing is that with $17 trillion in on balance sheet liabilities and $60 trillion in off balance sheet liabilities at the federal level with additional problems at the state and local level, I think that the government is unprepared to be able to service its debts at a higher interest level.
So from my point of view I don't think we are going to see demonstrably higher interest rates until and unless the market begins to demand a higher interest rate for savings. And it would appear that the government has ample room to reverse its tapering course and increase its policy of quantitative easing if needed to to continue to manipulate interest rates down, and it would seem that both the voters and the markets would be willing to tolerate this. It would seem that the big thinkers of the world have managed to convince capital markets that liquidity, i.e. the presence of cash in the system, is a substitute for solvency. And so there seems to be a lot of confidence in the market, which gives the ability to hold the interest rate down.
From that assessment, what is the demand for gold going forward?
Rick Rule : I think the gold markets have bottomed. I think they bottomed last summer.
The lower gold prices that we saw I think were, from the middle of 2011 to 2013, were on a macro scale largely due two things: confidence in financial markets, as a consequence of the liquity in those markets, but more importantly, the unwinding of the leveraged long gold positions that some institutions and hedge funds had in the carry trade days of 2010 and 2011.
In the middle of last year, I think what we saw was a year and halfs worth of concerted physical buying finally overwhelming the unwinding of the futures market. I think we saw a classic bear market activity, which was a movement of bullion from weakened, leveraged long institutions to strong hands, all cash, leveraged buyers, largely in Asia.
We didn't see a capitulation sell off in either gold or gold equities 2013, although we certainly saw an unpleasant market. And the consequence that we didn't J curve down means that we don't have a J curve up. We have a very healthy recovery from my point of view, where advances are subsequently consolidated. So the chart looks like gradually rising stair step, which is a very, very healthy chart, for a bear market that is giving way to a bull market. I am very constructive to the gold market.
How are the gold juniors doing?
Rick Rule : Well I think the gold juniors are doing extremely well. People compare them to where they were in optimal times. Not where they have been recently. And I think we saw the gold juniors bottom perhaps in July of last year. And put in a pretty good first half this year. Individual investors are troubled by the valuation now compared to 2010 and 2011. But people need to realize that those were optimal, not normal conditions.
There are still a lot of problems with the gold juniors. There is no reason for most of the juniors that are listed to exist. You know they are sort of vapour exploration companies. And it would be useful went to listings heaven. But that hasn't happened yet.
What is interesting about the market, in good markets and bad, is that the overall junior market is always over-price. in good markets or bad. That face disguises the fact that the best 10% of the companies in the sector could generate so much wealth that they add credibility or in some cases even lustre to the overall market.
And people who have been around the sector for ten years and have begun to understand the good from the bad and ugly, they have had a very good year indeed.

The article is about the interview with Rick Rule at Sprott Global Resource Investments Ltd.