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Sean Boyd continues:  “Gold equities are at historic lows and the companies are working on their business models and putting together plans that will allow them to weather this volatility and be in a position to participate when gold moves higher.  We firmly believe this is just a short-term blip, and gold will go right back to the $1,800 level....

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“This rise could take some time, perhaps as much as the next twelve months.  We look at this in terms of what happened in April.  It was a well-orchestrated trade (manipulation) that was extremely profitable for the shorts. 

But when we look at the physical market, we still see people wanting and needing to own gold, and those people are taking advantage of this opportunity to accumulate and build positions at prices they did not think they would be able to do it at. 

Over the short-term there may be some continued volatility here, and I wouldn’t be surprised to see hedge funds still trying to attack the price creating moments of weakness in gold, but we firmly believe the market is going to be constructive going forward.  Nothing has been fixed.  If you actually look the analysis that’s being done by a lot of the major banks stating that gold’s days are over, basically what they have put forward is a Goldilocks scenario. 

And when you actually press them on it they say, ‘Well, yes, my assumption doesn’t include any currency wars, and it assumes that economies are going to continue to move forward and grow at a pace they haven’t grown at in years.’  And we just think that Goldilocks scenario makes absolutely no sense, and that there will be serious issues in the debt market in the future.

There will also be continued uncertainty, and ultimately there will be inflation.  So you need to own gold.  The people we talk to are looking at this as an opportunity to position themselves in quality gold companies and bullion.  We also believe that’s what people should be looking to do now.”

Eric King:  “Sean, we have been seeing gold and silver mine closures with prices at these manipulated and highly discounted levels.”

Boyd:  “The industry was going through a process of evolving and changing its business model.  The industry was moving out of a growth phase where it had been building a lot of mines.  But what we saw last year was a lot of big projects that were put on the back-burner.

What you will see over over coming months, and what you’ve started to see in the last week or two, is companies announcing they are not going to proceed with expansion because they are looking to preserve capital.  All of that bodes well for supply.  We are certainly not going to see an increase in gold supply.

This will not only impact supply, but it will also make for better businesses.  Companies will be more focused on execution and that execution will give investors leverage to the gold price.  This is all part of a phase where the industry is evolving.

Between now and early March, companies will have already made their plans and be pulling back because budgets are being set right now.  When gold turns, you want to be positioned in quality companies because of the leverage you will get from them that won’t get from an ETF.”

Boyd also added:  “If you look at the sources of demand, India is very strong even though their government doesn’t want their people to buy and import gold.  But the Indians are still buying at near record numbers.  China has been strong and will continue to be strong, and central bank demand will continue to be there as well. 

But we believe there will be a dramatic increase in demand when people finally realize that the Goldilocks scenario is not going to play out, and that fiat money will continue to just be debased.  If you look at the 1970s, gold went down 50% at one point and then it rose 800% over the next few years.  We have already seen a major correction in the gold price, and so I think the big money is using this as an opportunity to build positions ahead of what they believe will be another repeat of the 1970s style mania that we saw in gold.”

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