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What Investors Need to Know About Gold & the Mining Shares
With continued volatility in gold and silver, today King World News interviewed 25 year veteran Caesar Bryan. Gabelli & Company has over $31 billion under management and Caesar Bryan has managed the gold fund since its inception in 1994. Caesar addressed the mining shares, but first, here is what Caesar had to say about what is happening with gold: “You know we’ve seen these type of corrections in this gold bull market before, Eric. This reminds me a little bit of 2008, in the sense that there was this selling of quality assets across the board, in an effort to raise dollars.”
Caesar Bryan continues:
“The background of all of this has been the possible disruption in the eurozone by Greece exiting the euro or some other type of credit event taking place. On top of that it is a seasonally weak period for gold. There were issues in India on the physical off-take (because of the tax).
Also, as the dollar has gained strength, the knee-jerk reaction is for gold to come down. As gold has breached key technicals, you’ve had traders selling and shorting more....
Continue reading the Caesar Bryan interview below...
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“The fundamental story for gold has not changed, and if it has, it has changed for the better.
There is simply too much debt, both here and in Europe. In this environment of too much debt, you are faced with defaults on one hand or money printing and inflation on the other. Both scenarios are positive for gold, but we have to endure these sharp pullbacks.
Caesar also Added: “Clearly, Eric, we’ve seen a big decline in the value of gold equities. Yesterday I was reading a piece by Don Coxe, a well known strategist. In his note he did a calculation on how much gold one can buy with $1,000 in the gold ETF versus what can be purchased with some mining companies.
Based on the prices a few days ago, so it’s more extreme now, but with $1,000 you can buy .62 ounces of gold in the ETF. If you buy $1,000 of Goldcorp shares, you get 4 ounces of gold. With El Dorado, an intermediate company, you get more than 5 ounces of gold. With a smaller producer like Perseus Mining, you get nearly 7 ounces of gold.
So, you can get up to 7 ounces of gold for $1,000, or .62 ounces through the ETF. Clearly he wasn’t making a recommendation on these stocks, he was just bringing to attention the tremendous value in the gold equities as a group. I thought that was interesting.
Also, as we’ve said for some time, in the gold equities you also have potential for income through dividends. Even at today’s gold prices, Newmont Mining stated they would pay a dividend of $1.20. With gold over $1,600, they’ve committed to a dividend of $1.40.
Investors also get, from the equities, as we just noted with Don Coxe’s quote, the opportunity to buy gold in the ground at a massive discount to where gold is currently trading. Of course, with many of these companies there is also the opportunity for blue sky, in terms of resources that have yet to be added to the reserves.
Obviously this is not helping the gold equity market right now because it has been in a big liquidation. I mean the selling has been in a vacuum, especially in some of the smaller companies. So there’s been an air pocket, but the fundamental values will come back into the market over time.
By the way, the mining indexes are not to the lows of 2008, but relative to the price of gold, we are back at the lows of 2008. You have to remember gold was a lot lower back in 2008. This decline in the gold equities has really been a painful, painful experience. In my long career, it feels like the gold shares have never been this cheap relative to the gold price.
Gold was down to about $700 at the low in 2008, so the relationship of the XAU to gold is now back to where it was in 2008. I thought it was extraordinary at that time and I believe the same thing today. Select producers and junior companies, that have been taken to the woodshed, will provide wonderful returns going forward.”
© 2012 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.
The Rick Santelli and John Embry audio interviews are available now. Also, be sure to listen to this week’s incredible line-up of other KWN interviews, which include Rick Rule, Bill Fleckenstein, Michael Pento, MEP Nigel Farage, James Turk, Pierre Lassonde and more by CLICKING HERE.
Eric King
© 2012 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.
May 16, 2012
