by Tim Wood
27 January 2003
VANCOUVER -- If the gold conference circuit is a sentiment barometer, then bullish is too timid a word for the mood here. The Cambridge House investment conference is easily the busiest we've seen in the last three years, with a full complement of companies exhibiting, thronging crowds, oh, and don't forget, voracious promoters.
So what seems to be on everyone's mind? A valuation dilemma and concern about 'dead fish' ñ dubious projects achieving uncommon favour with investors.
Most everyone Mineweb spoke to was struggling to make sense of gold equities' lethargic response to the rampant gold price. By most measures gold stocks seem attractively priced, but they could be signalling that the gold price has got ahead of itself.
That's the caution from Paul van Eeden of International Speculator. Presenting early on the first day, van Eeden reminded the audience that gold stocks have a reasonable record of anticipating the gold price. Taking heed that equities are potentially discounting a correction in the gold price, he says he has been selling gold and is presently mostly in cash; 'one of the highest levels ever' for his portfolio.
James Turk, of digital gold pioneer GoldMoney, has a different view. He told Mineweb that GoldMoney has grown 11-fold in the past year, which he attributes primarily to the realisation among investors that owning electronic gold has several advantages over coins and bars. He's hardly concerned that things might slow down.
Turk has one of the most aggressive gold forecasts in the professional pundit league, calling for $900 gold this time next year. 'The weak dollar remains the key driver. We forecast the dollar to lose 5% in 5 weeks. It's off 3% in two weeks so we're more than half way there,' he says with a level of confidence that is not unwarranted given his track record.
Financial uncertainty and insecurity just fuels the gold conflagration, with Turk noting that Fed Chairman Alan Greenspan has signalled quite openly that 'interest rates will be on hold for some time.' Negative real interest rates, the surest thumbs up for gold, persist, while the twin deficits ñ trade and budget ñ further undergird the metal.
The only potential blot on Turk's scenario is some miraculous ascetism that might befall the US government and cause it to reign in the deficits. Not likely in this topsy-turvy era of small government Republicans aspiring to New Deal gargantuantism. 'The deficits have to be monetised; good for gold.'
He's not at all worried about the evident loss of momentum in dehedging which has so far played an important role in lofting the gold price. 'It has mostly been in the paper market, there is still sufficient physical demand.' India's loss of appetite? No problem. 'The rupee has been strong, but look at China's Central Bank increasing its gold holdings which shows a more pragmatic attitude and we've got Chinese New Year coming up.'
As for the 'dead fish' floating to surface thanks to the higher gold price, the anecdotal evidence suggests most people think investors suckered into dodgy companies deserve everything they get, but there is an overriding fear that a scandal is brewing that will damage the whole sector.
'You can't legislate morality,' a field geologist said fatalistically, referring to Canadian legislation that is supposed to keep the unscrupulous at bay. We'll see. Probably sooner than we like.