The Mother of All Gold Bull Markets?
By: The Gold Report
Jun 02, 2012
s gold preparing for another shot up to $2,500/ounce heights or on the way down after being overbought? In this exclusive interview with The Gold Report, two respected names in the investing world share their arguments for what could happen in the coming years and how to profit from it. Financial Adviser Peter Grandich predicts a lot more upside while AlphaNorth Asset Management Chief Investment Officer Steve Palmer has a more cautious outlook on the shiny metal. Where are you putting your money?
The Mother of All Gold Bulls
The Gold Report: Peter, you have called this the mother of all gold bull markets and predicted $2,500/ounce (oz) gold prices. What is driving the price of gold? Is it China’s growth? Is it a weak U.S. dollar? Is it global fears? Is it central bank currency printing? What’s going on?
Peter Grandich: This mother of all gold bull markets was built on a foundation of dramatic changes in the gold market itself that began in earnest 10 years ago and propelled it up to where it is now. First, two significant negatives turned into positives. The gold market had basically capped due to constant central bank selling and producers being aggressive forward sellers of future gold production. However, starting with the Washington Accord in 1999, the central banks dramatically changed direction and agreed to limit gold sales. In fact, in the last two years the central banks have actually become net buyers. At the same time, gold producers have made hedging a thing of the past. Hedging has really become a four-letter word among investors.
TGR: What convinced companies to stop forward-selling their production?
PG: The gold market finally started to rise and people realized that companies that were hedging were making less money than companies that were not hedging. In the ’80s and ’90s, the old American Barrick was almost a commodities trading house rather than a gold producer because it used the hedging derivatives to make money. But the great mother bull market made that counterproductive and investors began to shy away from any company that pre-sold gold.