Investing During the Era of Peak Gold Discoveries

The Gold Report: Brent, you've quoted Goldcorp Inc.'s (G:TSX; GG:NYSE) CEO, Charles Jeannes, saying that we've reached peak economic gold production. What led us to this point?

Brent Cook: That's a big question that really goes back to what was happening in the global exploration sector 20+ years ago. I don't want to get into the peak gold production idea but instead focus on the discovery curve and what's behind the problem we are seeing in the gold sector.

Why aren't we finding as many gold deposits as we used to, or at least as many economic deposits? In 1995 or so, the discovery boom in the gold sector peaked and that success is largely tied to the opening of large areas of earth that were previously off limits to serious exploration. Since then, exploration success and new discoveries have trended down. However, in terms of gold production, it's taken about 20 years for all those discoveries to work their way through the system to come into full production.

So what Charles Jeannes sees is that in 2015 or so, gold production is going to be tapering off as opposed to expanding. That's especially true given the current gold price and cost structure. A lot of these companies aren't making much money, or any money at all. They'll be shutting down loss-making projects over the coming years.

TGR: Are we running out of gold in the world, or did we just not make an investment in a timely manner, say, 20 years ago? Continue reading "Investing During the Era of Peak Gold Discoveries"

Can Gold Act as a Safe Haven Again?

The Gold Report: The World Gold Council, which gets its numbers from Thomson Reuters GFMS, reports that total gold demand in Q2/14 fell by 15% versus the same period in 2013. Furthermore, physical bar and official coin demand were basically cut in half while jewelry demand fell by 217 tons or 30%. What do you make of all of that?

Christos Doulis: Clearly, there has been less enthusiasm for owning gold in recent years. A lot of that has to do with the concept of gold as a safe haven. Six years ago, when the financial crisis was in full swing, gold was $800900/ounce ($800900/oz), but on its way to $1,900/oz in September 2011. The fears associated with that period have largely receded and we're seeing a decrease in both gold investment and jewelry demand, which is often a form of savings in non-Western nations. We're seeing a reaction in demand because the fear component that drives interest in the gold space is down significantly.

TGR: Meanwhile, central bank gold purchases were up 28% year-over-year. Is that the silver lining?

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CD: I'm a goldbug in that I think everything that has happened since 2008 is ultimately positive for precious metals prices. We've had a massive money printing exercise. The markets are running because there's so much money and the money has to go somewhere. The fact that central banks are buying gold tells me that goldthe currency between states and central banksis still regarded as an important part of the reserve mix. While the demand for gold among general investors may have decreased during the last few years, the policy makers in the central banks are well aware of the seeds that have been sown in a fiat-currency race to the bottom.

TGR: With the U.S. economy seemingly strengthening, gold seems destined to trend lower in the near term. What's your view? Continue reading "Can Gold Act as a Safe Haven Again?"

Gold at $1,500 by Christmas?

The Gold Report: Gold continues to languish under $1,300 per ounce ($1,300/oz), even as full economic recoveries in the U.S. and the European Union (EU) have yet to occur, despite trillions in new debt and stimulus. Meanwhile, we have two wars in the Middle East that could escalate, as well as reports that Russian troops are in Ukraine. With all that in mind, do you think that gold's fundamentals are less important than they once were, or is the price of gold being held back by other factors?

Charles Oliver: Gold is just as valuable today as it was 100 years ago. There was an orchestrated takedown of gold in April 2013. It has since traded between $1,200/oz and $1,400/oz, and this flies in the face of the conditions you mentioned.Silver Wh

"Asanko Gold Inc. has great assets."

We're going to have to be patient. We have gone through a bottoming process. We've had similar conditions before. In 1974, after the oil embargo, U.S. inflation was increasing dramatically, yet gold fell from about $200/oz to about $100/oz in 1976. Then over the next four years gold subsequently rallied to over $800/oz. In this decade, gold has fallen from $1,921/oz to $1,180/oz, but the fundamentals remain intact, and gold will regain its reputation as a unique store of value.

TGR: You used the phrase "orchestrated takedown." Do you agree with the thesis advanced by the Gold Anti-Trust Action Committee (GATA) that gold and silver prices are manipulated downward by central banks? Continue reading "Gold at $1,500 by Christmas?"

Louis James: Are You Ready for an Early Shopping Season?

The Gold Report: Jeff Clark, senior precious metals analyst at Casey Research, recently wrote in an article titled "Time to Admit that Gold Peaked in 2011?" that countered a chart making the rounds showing gold matching its 1980 inflation-adjusted dollars peak in 2011. The chart implies we should expect a decade or more of lower prices. Aside from the fact that John Williams of Shadow Government Statistics might have a problem with how inflation was calculated, how are gold's fundamentals different today than they were in 1984?

Louis James: The fact that things are different today than in the 1980s is a really good point. The argument over methodology almost doesn't matter. Even if it were true that the gold price of 2011 matched the inflation-adjusted gold price of 1980, that wouldn't mean that gold has to go down the way it did in 1980. There wasn't a near collapse in the banking sector back then. There wasn't the Lehman Brothers upset. The government did not triple the money supply. We're dealing not with apples and oranges, but apples and whales.

TGR: If history is not a map for the future, is John Williams correct that we are getting ready for hyperinflation? Continue reading "Louis James: Are You Ready for an Early Shopping Season?"

When The Major Equity Market Bubble Crashes, Michael Berry Will Take Refuge in These Gold Stocks

The Gold Report: Mike, you've been watching the stock market and, by extension, the precious metals markets very closely for signs of a larger equity market blow-off that could send gold higher. What makes you think the Dow Jones Industrial Average and the NASDAQ are in a bubble? What are the signs that a crash might be imminent?

Michael Berry: I have been watching bubbles since 1987. In September of that year I correctly predicted the 25% crash of October 19. We have been blowing through mini and maxi bubbles for 30 years; this one is nothing new.

The solution to our macroeconomic issues has been to inflate new bubbles, to inflate asset values to soften the blow from the last bubble, all the while creating the conditions for the next one. That is how we ended up with the current equity market bubble. It is driven solely by the Federal Reserve's liquidity. Always remember that liquidity begets liquidity. I also see a debt market that I consider to be a bubble. These markets are just not sustainable. I can't say when, but we have an equity market decline coming, maybe a severe decline.

TGR: The housing bubble and the tech bubble were, by definition, confined to certain niches initially and then the impact reverberated to other sectors. Are you predicting a market-wide crash where everything falls or will it be confined to certain sectors? Continue reading "When The Major Equity Market Bubble Crashes, Michael Berry Will Take Refuge in These Gold Stocks"