Newsletter Reviews

$2,000 Gold Will Soon Kickstart Mining Shares

SOURCE: [The Gold Report] - The lack of excitement haunting the precious metals and mining shares markets over the past year is expected to change in the next few months, according to Michael Fowler, senior mining analyst with Loewen, Ondaatje, McCutcheon Ltd. In this exclusive interview with The Gold Report, he explains why he expects gold to finally break through the $2,000/ounce barrier in 2013 and how this should affect the mining stocks that he covers. While share prices are generally low across the board now, Fowler tells us about a few of the ones that he expects to shine bright when the market turns.

 The Gold Report: It seems that not much has happened in either the metals or mining shares markets since you last spoke with The Gold Report in March. What's it going to take to get people excited again?

Michael Fowler: Talking about gold, the price has been churning sideways. In my opinion, what's really going to get people excited is that the gold price should actually go up quite strongly into 2013. The other point is a moderation of some of the current cost pressures in the mining business. On the metals side, we've seen a lot of softness in worldwide demand but I think that coming into 2013, we're going to get a better metals market as China continues easing its monetary policy. So I see a pickup in demand coming into 2013.

TGR: We've experienced all sorts of conditions, events and expectations over the past couple of years that probably could or should have taken gold past $2,000/ounce (oz). What do you see on the horizon that will finally get some major money flowing into precious metals or have the rules changed due to some other factors that are not obvious?

MF: Gold essentially reacts to monetary liquidity and to the concept of depreciating currencies around the world. Looking at gold in terms of euros or some of the other currencies, it's done quite well. It just hasn't performed in terms of U.S. dollars. The thing that I see on the horizon is potentially a weakness in the U.S. dollar. This could come about from the U.S. having to raise its debt ceiling, or it could have something to do with the Federal Reserve coming up with Quantitative Easing 3, which could happen in the short term and probably within the next six months. So, a de facto weakness in the U.S. dollar is going to be an important factor for gold to go past $2,000/oz. I'm looking for that to happen in 2013.

TGR: It seems that no matter what happens, the dollar ends up being the refuge of last resort. People talk it down and complain about all of the debt problems and everything else. Yet, when they have a choice, they seem to flee into the dollar, which defeats the price of gold going up.

MF: That is the case now. There seems to be a lot of confidence in U.S. treasuries or the U.S. currency but, in a sense, that's probably a mistake. The debt situation is going to get some attention when the debt ceiling is hit again. It is certainly going to get some attention during or after the election in the U.S. I think people are going to start focusing on the U.S. situation more and more. For instance, the city of San Bernardino in California recently announced it was going bankrupt. These problems are all over the place in the U.S. I just think it's a matter of time before people are going to focus on it, and then some confidence is going to be taken out of U.S. assets and U.S. treasuries.

Full Article