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Ing:  “It is amazing that the sentiment in the gold market is that what we are witnessing is just a dead-cat bounce after gold’s dramatic fall last year.  These people are looking in the rear-view mirror....

Continue reading the John Ing interview below...  


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“First, it’s no coincidence that since the tapering gold has been the best-performing asset.  Gold is already up 10% since the beginning of the year, and the mining shares are up more than 30%.  In the case of the mining shares, this is a case of leverage working both ways, up and down.

The second point I would make is that when you look at the gold industry, the gold price fell to a level that was virtually the break-even cost for most producers.  So nobody is going to produce gold at a loss, including the biggest gold company in the world.  Barrick had literally lopped off one million ounces of production, rather than continuing to produce gold at a loss. 

The third factor that the gold shorts are missing is that gold broke out above its 200-day moving average, which is around $1,310.  Although gold retreated briefly yesterday, it simply bounced right off that 200-day moving average which has now become support.

The next technical level of resistance is between the $1,325 and $1,360 area, but really, Eric, the more meaningful resistance is around $1,550.  By the time gold is trading back at the $1,550 level, most everyone will be bullish, which is in sharp contrast to the pessimism we are still witnessing today.

Professionals around the world are asking me, ‘What will really turn these gold stocks around?’  Well, as I mentioned, gold stocks are already up something on the order of 30% this year.  But we have also seen Goldcorp’s hostile bid for Osisko.  We have seen Waterton, a private equity firm, make a bid for Chaparral Gold, and Hudbay has also made a bid for Augusta.

In essence, these stocks are so cheap that even the mining companies themselves recognize that, and are buying reserves in the ground at very cheap levels.  So if it is cheap to the boards of these companies, it should be cheap for the investors.

The Gold Index, which I saw below 150, and is now around 205, I fully expect that index to hit 300 on this rise (a nearly 50% move from current levels).  This move will be led by the Barrick, Agnico Eagle, El Dorado, and other high-quality companies that have now turned the corner.”

Eric King:  “With bearish sentiment still below the 2008/2009 collapse levels, does it feel to you like we will have a surprise this Friday, and maybe gold moves higher instead of getting the traditional Friday smash?”

Ing:   “I think that the shorts already tried to smash gold today.  I am still hearing from my contacts in Asia, particularly in China, that there is solid physical buying, so we could well be in for a surprise tomorrow.  I will be meeting with gold companies next week, and my expectation is they will be looking for a move toward profitability or even greater profitability and that is always good for shareholders.

We still see the industrial and jewelry demand, which remains strong, and so I am focusing on the battle between the paper gold market and the physical gold market.  I fully expect the physical gold market to overwhelm the paper market.

We know from every expiry that the physical gold market just gets tighter and tighter.  When you see there is a dramatic amount of physical gold taken down on the front month in Shanghai, that tells you Asia is acting as a huge vacuum cleaner of all of the world’s available gold supply.  The bottom line is there is not enough gold around to satisfy that demand.”

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