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John Hathaway - Generation of Gold Analysts Out to Lunch
With the recent strength in the gold and silver markets, today King World News interviewed four decade veteran, John Hathaway, the prolific manager of the Tocqueville Gold Fund. When asked about the action in gold and what he expects going forward, Hathaway replied, “I mean it’s great. People got shaken out when gold went below $1,600. The price of gold has come right back up and it’s left all of those investors as sold out bulls, so it’s great action. I’m actually really pleased with how the stocks are behaving because now we’ve seen some very good earnings.”
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
November 4, 2011
John Hathaway continues:
“Today the ECB cut interest rates and that was not expected. I don’t remember the exact number but they are somewhere around 1 1/4%. That was a response to the weakening economic conditions in Europe. This was out of the blue and it was probably the single most important thing explaining the move in the gold price today.
Typically the sell-side analysts are very unenthusiastic, but to us we are doing quite well and we are set up to assault new highs in both the stocks and the metal. The pessimism is classic for a bull market. People are skeptical and many are on the sidelines.
The ones that were enthusiastic when gold was $1,900 are nowhere to be seen now. A lot of that money is now on the sidelines and I think it’s fantastic. One of the main things happening right now is the earnings that are coming in for these gold producers are very strong. Despite that fact, the analytic commentary is unbelievably neutral. There is no enthusiasm.
These companies are making a huge amount of money and the stocks are going up and the analysts are saying, ‘Big deal.’ Like I said, there is no enthusiasm and I think that’s great....
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“I was at a meeting the other day where there was a commentary on Newmont Mining and the assumptions that had to be made to support the stock here. I won’t mention the name of the firm but the analysis was based on a drop in the gold price to $1,000 in five years.
That left the analyst with a target price on Newmont of $56 and I believe the stock is $68 today. If that analyst were to use the same methodology and assume a $1,700 price in five years, that same methodology would get Newmont to $200.
So these analysts are totally behind the curve. I would say there is a generation of sell-side analysts that are just going to be completely out to lunch on this whole thing.”
Coming back around to fundamentals, Hathaway noted, “As I mentioned previously, we saw Europe cut interest rates today. That probably won’t be enough, they will have to do that some more. Europe is slowing down and that’s kind of scary. It just seems to me that you have the ingredients for a new high in gold.
The move in Europe fueled gold today and there is more of that to come. Bernanke has itchy trigger fingers on the next quantitative easing. He didn’t want to say it in so many words, but most of the commentary seems to anticipate another round of quantitive easing. So things look great for gold.”
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
Eric King
