Leeb:  “I thought that gold would go down and test its lows at $1,180, and maybe even break that level just a little bit as part of a bottoming process, but gold is acting better than I expected.  Look, as you know, Eric, long-term I expect gold to be a $10,000 metal.  That hasn’t changed at all....

Continue reading the Stephen Leeb interview below...


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“So what we are seeing right now in terms of the gold price is just a short-term phenomena. 

China is the world’s largest producer of gold, and they keep all of that gold production.  So not only are the Chinese vacuuming up all of the gold from the West, but they are also keeping the world’s largest volume of production for themselves as well.  This is why the West is losing control and the people in the West are going to be the bag holders.

But the only way the Chinese can be doing all of this mining is if they believe gold is going to be selling for at least $2,000 to $2,500.  The Chinese are not looking at the price of gold today.  Instead they are planning for the future.  This is what they are doing when they decide whether or not to go ahead with a particular project.

They don’t front-weight things.  In other words, if they put up an infrastructure project and that infrastructure project doesn’t earn anything for 3 or 4 years, they will live with it if they believe that 5 or 10 years out they are going to be able to use it in the future to dominate things. 

And that’s exactly what you are seeing with their gold production.  There is no way, given China’s reserve base, that they could afford to mine as much gold as they are mining today unless they are assuming gold will trade between $2,000 and $2,500.  This is because some of their reserves are being mined at a significant loss in terms of today’s gold price.

So here you have a country that is buying gold hand-over-fist, and they are mining gold as if they know it’s going to be priced at a minimum of $2,000 to $2,500.  As an investor, I’m not going to fight them.  It’s one thing to say, ‘They are buying gold.’  Well, they are buying gold at around $1,200, but it’s another thing to see them mining gold at all-in cash costs in the $2,000 to $2,500 range on some of these projects in China.

In other words, the Chinese are betting on significantly higher gold prices over time, otherwise they wouldn’t be mining at those high cost projects in China.  But they are spending that kind of money right now at some of these projects in order to cultivate gold. So either you believe the Chinese are idiots, or you believe they are correct in their belief that gold is going to surge well over $2,000 an ounce.  I’m betting the Chinese are right and gold is going a hell of a lot higher from here over time.”

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