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Eric King:  “Sean, where do you see the gold market at this point?”

Boyd:  “From a gold price perspective, we still see higher prices.  What we are looking at is strong Chinese demand, and we firmly believe that demand will continue to stay strong.  Indian demand has also been strong, despite the higher taxes and duties that have been put on gold.

We also expect Indian demand to remain quite robust.  Central bank buying will continue to remain firm in our view as well.  When you add up just those three components, astonishingly, it’s almost equivalent to the annualized gold production of the entire world....

Continue reading the Sean Boyd interview below...


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“We are not expecting increases in supply over the next one-to-two years, but we do expect continued strong demand out of the Far-East and from central banks.  We also believe that there will be continued ongoing financial uncertainty which will bolster investment demand for gold. 

When you add investment demand into that equation, this is going to drive gold prices much higher.  So we are looking for a 30% increase in the gold price over the next 12 months.”

Eric King:  “Sean, when you look at this bear market that gold went through, it was vicious for a couple of years.  But the brighter minds in the business such as John Hathaway, Pierre Lassonde, yourself, and others, they are basically saying the bear market is behind us now.  They believe we have entered a new bull market.  That will mean some dramatic upside activity in the gold price.  When you say we could go 30% higher over the next 12 months, can it be even more exciting that that in terms of the upside for gold?”

Boyd:  “It certainly could.  We are not factoring in super-high prices when we do our modeling and life-of-mine planning.  In fact, we are using conservative prices to ensure we have enough financial flexibility in our business. 

But from a gold price perspective, there is no reason that it can’t hit all-time highs.  The reality is that none of the excessive debt levels have been addressed.  Everybody is just assuming that liquidity is about to end, all of the issues have been solved, and there are no problems in the economy and we are headed back to a growth phase.

Well, we would be in the camp that says everything hasn’t been fixed, and there is still going to be uncertainty.  Uncertainty is what drives people to gold.  The bottom line when you work your way through all of these major issues is there is a fundamental desire out there for investors and major entities to want to own physical gold, and also to have it close (in physical form not paper).

We would certainly agree that there is this flow of gold from West to East.  There is a great desire to own physical gold in the East -- It’s in their DNA, and that’s not going to stop anytime soon.  That is quite solidly underpinning the price of gold here.  This is also why we are not overly concerned that the gold price is going to drop dramatically.  We are still going to have volatility, but over the next few years we think that volatility will mostly be to the upside for gold.”

Eric King:  “Sean, last week KWN had James Turk discussing gold slipping into backwardation once again, and the historic nature of what we are now witnessing in the gold market.  What are your thoughts on this perpetual tightness in the physical gold market?”

Boyd:  “It’s not a surprise.  Why does it take 7 years for Germany to get (a very small portion) of their gold back?  There is something fundamentally wrong in the system.  Why are people starting to build some of the largest vaulting facilities in the world in the Far-East?  Because of the flow of physical gold from the West to the East, and the desire for people in Asia to own physical gold.

This desire to own gold has been present in Asia for thousands of years, but the bottom line is Asians now have more disposable income to invest in gold and that’s exactly what they are doing.  As I said earlier, this is strongly underpinning the gold price here.  We will get volatility in the paper market, but that constant desire to own physical is what is now going to lead the gold price higher in the future.”

Boyd also added:  “We think that gold is going higher, but the big question is, how to play it?  A great deal of big money and smart money are asking themselves, ‘Will the gold equities outperform the gold price this time around?

I would suggest a lot of the gold industry has reworked their business models so that they can execute on their plans, and generate higher returns.  I also don’t think we are going to see dramatic cost increases like we saw last time because companies are more focused on how to manage their ore bodies for return, rather than just trying to maximize the life of those ore bodies.

So I think the businesses are better positioned today to deliver on promises, and better positioned to deliver returns than they were 3 or 4 years ago.  So as the price of gold moves higher, the profit margin will really hit the bottom line in a very aggressive manner.”

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© 2013 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 audio interviews with Stephen Leeb, Bill Fleckenstein, Pierre Lassonde, Dr. Paul Craig Roberts, Art Cashin, James Turk, Eric Sprott, Egon von Greyerz, James Dines, Hugo Salinas Price and Marc Faber are available now. Also, other outstanding recent KWN interviews include Jim Grant and Felix Zulauf to listen CLICKING HERE.

Eric King

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