Tag: the gold report

Rick Mills: Low-Cost Producers Trump Larger Mines in Costly Market

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The Gold Report: Rick, is this a good time to be buying gold?

Rick Mills: There are three key reasons to have exposure to gold bullion. The traditional reason is to protect against inflation. We're printing money. More quantitative easing has taken place and inflation looks to be coming down the pike. I buy groceries. I pay for gas. I can see inflation. I firmly believe it's going to get higher over the coming months and years. Buying gold as a protection against inflation is realistic.

The second reason investors have traditionally bought gold is as a safe-haven investment. There's a lot going on in the worldfrom secession talk in the U.S. to turmoil in Israel, Iran, Syria, the South China Sea region and Turkey.

One of the things that most investors don't know about gold is that adding a gold allocation to your portfolio, especially over the last decade or so, has provided substantial enhancements to the portfolio's return.

Gold helps minimize the downside deviations in an overall portfolio. In 2002, the SP 500 was down 23%. Emerging market equities were down 6%. International equities were down 16%. Yet gold was up 25%.

TGR: That was early in the bull run in gold. Continue reading "Rick Mills: Low-Cost Producers Trump Larger Mines in Costly Market" →

Paul van Eeden on Why Gold is Overvalued

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The Gold Report: Paul, your speech at the Hard Assets Conference in San Francisco was titled "Rational Expectations." You spoke about monitoring the real rate of monetary inflation based on the total money supply.

You take into account everything in your indicator that acts as money, creating a money aggregate that links the value of gold and the dollar. You conclude that quantitative easing (QE) is not resulting in hyperinflation and is not acting as a driver for the continuing rise in the gold price. What then is pushing gold to $1,700/ounce (oz)?

Paul van Eeden: Expectations and fear. It's very hard to know what gold is worth in dollars if you don't also know what the dollar is doing. When we analyze the gold price in U.S. dollars, we're analyzing two things simultaneouslygold and dollars. You cannot do one without the other. The problem with analyzing the dollar is that the market doesn't have a good measure by which to recognize the effects of quantitative easing.

Since approximately the 1950s, economists have used monetary aggregates called M1, M2 and M3 (no longer being published) to describe the U.S. money supply. But M1, M2 and M3 are fatally flawed as monetary aggregates for very simple reasons. M1 only counts cash and demand deposits such as checking accounts. M1 assumes that any money that you have, say, in a savings account isn't money. Well, that's a bit absurd.

TGR: What comprises M2? Continue reading "Paul van Eeden on Why Gold is Overvalued" →

Rick Rule: Be a Risk Manager, Not a Reward Chaser

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The Gold Report: Rick, you believe the natural resources sector is experiencing a cyclical decline in a secular bull market similar to the 1970s. Is that true for other sectors as well?

Rick Rule: I learned the hard way not to assume that my success in the natural resource business was transferable to other sectors, so I am going to stick with resources.

However, there are parallels with the gold market. In the 1970s, we had a spectacular resource market, in particular for gold. Its price soared from $35/ounce (oz) to $850/oz. By 1975, in the middle of that secular bull market, gold had fallen to $100/oz. Those who sold at the bottom missed an 800% move in six years.

"I own gold the way that I own life, auto or homeowner insurance. I regard it as catastrophe insurance."

It is important to understand that in cyclical markets like resources, declines in secular markets are to be expected. From my point of view, you need to understand cyclical declines for what they aresales.

TGR: Is it fair to think that the prices of natural resources will bounce back as they did in 1970s, when the recession was much shorter and not as global? Continue reading "Rick Rule: Be a Risk Manager, Not a Reward Chaser" →

Three Points a Jurisdiction Must Meet Before You Invest: Charlie Brookes

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The Gold Report: What approach has Praetorian Resources Ltd. (PRAE:LSE) taken toward resource equities at this point?

Charlie Brooks: Praetorian Resources is focusing its attention on scalable and quality assets run by experienced management teams and wherever possible is trying to reduce its exposure to high levels of financing risk.

TGR: Can you explain what Praetorian is?

CB: Praetorian Resources operates exactly like a fund but is actually structured as an investment holding company. We hold 15 investments at the moment, a variety of junior resource companies. Polar Star Mining Corp. (PSR:TSX.V) and Maya Gold Silver Inc. (MYA:TSX.V) are significant investments for us. We also like A-Cap Resources Ltd. (ACB:ASX), which is a Botswana coal and uranium company.

TGR: Why does Praetorian have two tickers on the website? Continue reading "Three Points a Jurisdiction Must Meet Before You Invest: Charlie Brookes" →

Christopher Welch: Searching for a Perfect 10

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The Gold Report: Chris, the lifeblood of your business is financing. What's your read on the appetite for junior financings compared to earlier this year?

Christopher Welch: The appetite for high-quality projects in the mining space is basically the same as it was in early 2012. However, in the current environment, where share prices are a bit depressed, it's getting harder to match investors with companies at share prices that are acceptable to both parties.

Aureus Mining Inc. (AUE:TSX; AUE:LSE) is conducting a big fundraising for its New Liberty mine in Liberia, which is positive news demonstrating there are green shoots in the equity space for West African gold, which is encouraging. We're optimistic that there will be more deals done in the near term.

TGR: There's been some instability in Mali, which stemmed from instability in Libya in part, and now there's growing religious tension in Nigeria. Does West Africa remain as stable as you once believed it was? Continue reading "Christopher Welch: Searching for a Perfect 10" →