Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Weekly Wrap-Up: Gold and Silver Gain Over 1% and 2% on the Week
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 11 17 2017
By: Ira Epstein

Next-Generation Crazy: The Fed Plans For The Coming Recession
By: John Rubino

COT Gold, Silver and US Dollar Index Report - November 17, 2017
By: GoldSeek.com

Gold Miners’ Q3’17 Fundamentals
By: Adam Hamilton, CPA

Bonfire of the Absurdities
By: John Mauldin

The Social Security Inflation Lag Calendar - Partial Indexing Part 1
By: Daniel R. Amerman, CFA

Rob From The Middle Class Economics
By: Gary Christenson

GoldSeek Radio Nugget: John Williams and Chris Waltzek
By: radio.GoldSeek.com

The Metals Market Is A Mess And Will Likely Continue To Frustrate You
By: Avi Gilburt

 
Search

GoldSeek Web

 
Louis James: Are You Ready for the New Gold Market?


 -- Published: Wednesday, 28 May 2014 | Print  | Disqus 

JT Long of The Gold Report (5/28/14)

Sometimes hindsight can lead to foresight. Casey Research's Louis James says now that the market seems in agreement that December was the bottom for gold, the value is becoming evident to investors. In this interview with The Gold Report, James discusses the new landscape for gold and silver and how to read the field for the best route to profits.

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?

LJ: History never repeats itself, but it does rhyme. I agree with John Williams. On a fundamental level, profligate governments around the world have been spending beyond their means, and eventually they have to pay the piper. The longer they put it off, the bigger the bill gets. Is it all going to unravel this year? I don't know, but it's impressive that someone as cautious as John Williams seems to think that it will. But whether it happens this year or next, it doesn't really matter as long as you're investing with a long-term view.

TGR: In hindsight, a lot of people have targeted last December as the bottom of the gold market. Do you look at those sorts of things in the rearview mirror?

LJ: On January 6, I published a statement to the effect that both Doug Casey and I thought our market would turn upward in 2014. On February 3, I said in print that the bottom was in December. I wasn't willing to say that until the upturn was reasonably clear, but if we wait too long to take the plunge, it's of no use; when it's obvious to everyone, you lose much of the upside. Those of us who started buying in January and bought aggressively in February have benefited enormously. We were actually able to issue some profittaking calls in March before the market started correcting again.

TGR: What gold number are you using to evaluate whether a company can be profitable for the rest of 2014?

LJ: I have two numbers I keep in my head: spot and the three-year trailing average. It used to be cautious to use the three-year because gold prices were rising and the averages were lower than spot. Now the three-year is $200 above spot, so there are serious perception and credibility issues with using it in print. But I do still look at the three-year, because the low gold prices we have now will not last.

Right now, the price of gold is flirting with cost of production—it's not sustainable. Some companies are using three price scenarios in their feasibility studies: a base case near spot, a scenario at significantly lower prices and another at significantly higher prices. Today, that more optimistic scenario is often the three-year trailing average. I like this approach; I want to see that they have a project that works right now. I want to see that if gold goes lower for a while, they're not going to dry up and blow away in the wind. And I want to see if gold goes higher, how much higher my return will be.

TGR: Are you investing based on the fundamentals of the macro gold and silver market or based on the challenges and opportunities of the individual companies?

LJ: The macro picture sets the stage, but it doesn't help you pick a stock. I'm very much looking at the individual companies.

TGR: It has been a tough couple of years for junior mining companies. Some haven't made it. Is it easier to spot the good ones than it used to be because there are fewer of them?

LJ: Yes and no. The field has not been cleared that much at all; many penniless companies have gone into hibernation—a few have even left the field and become medical marijuana companies—but the oft-predicted tsunami of bankruptcies has not appeared. On the other hand, if you see a company that's got the goods that was previously trading at two or three times its current price—and has the cash to keep advancing—it's not a bad bet that it will rebound with the market. It doesn't even have to hit a new high to make you a bunch of money.

Because there are many opportunities today to buy companies that have already produced extraordinary discoveries, there are far fewer grassroots-type projects in our portfolio. It's not that we don't like early-stage exploration—those companies actually have the most explosive upside potential—but that with so many less risky, quality plays on sale, it's just too tempting to go with the safer bets.

TGR: What are your thoughts about silver compared to gold?

LJ: There are vibes about silver volatility being at near-decade lows and that always precedes a surge. I'm not sure the numbers actually bear that out, other than to say, generally speaking, that low prices precede high prices because markets are cyclical. If we're at a cyclical low, it's not rocket science to say it's going to go up.

That having been said, there are so many new uses for silver out there, I see very strong demand, particularly in solar panel use, which is rising and rising.

My way of looking at it is that silver and gold always move together. Sometimes the ratio stretches. Sometimes it contracts. But they always move together. If you're a gold bull, you have to be a silver bull.

On top of that, silver is an industrial metal, while gold is primarily a safe-haven metal. If the economy is successfully reflated by the governments of the world, then demand for silver rises. You have a safer bet on silver than gold in that respect. If, on the other hand, government efforts to save the collapse of the global economy are unsuccessful, then industrial demand may fall off, but the precious metal safe-haven demand will pick up. Where gold goes, silver goes also. It's a win-win metal.

TGR: What do you look for in a prospect?

LJ: I'm looking for, and happy to find, something that is legitimately undervalued. The company should have great management. Its flagship project should have a net present value multiple over the company's enterprise value (or a clear shot at that), cash in the bank to advance, and be delivering excellent exploration or development results. Then the stars are aligned and it goes on my shopping list.

When will we see payday? As above, it could be this is the year—Doug Casey thinks so—but regardless you should come out well if you buy value on sale.

And it could happen very quickly: If the Ukraine situation pushes Russia and the Western countries into an economic tit-for-tat that sends the dollar over the edge, it could trigger the proverbial "it." You don't want to be short when the train is leaving the station.

TGR: Thank you for your time, Louis.

Louis James is at Casey Research, where he's the senior editor of the International Speculator, Casey Investment Alert and Conversations with Casey. Fluent in English, Spanish and French, James regularly takes his skills on the road, evaluating highly prospective geological targets, visiting explorers and producers at the far corners of the globe and getting to know their management teams.

DISCLOSURE:
1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an employee.
2) Streetwise Reports does not accept stock in exchange for its services.
3) Louis James: I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

Streetwise - The Gold Report is Copyright © 2014 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.


| Digg This Article
 -- Published: Wednesday, 28 May 2014 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.