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Tuesday, November 6, 2012

Van Eck: Gold and Miners About to Soar


Joseph M. Foster, who is the lead investment team member for its flagship fund, Van Eck International Investors Gold Fund, said in an interview with The Gold Report that he sees gold prices and gold mining companies, especially midtiers and junior stocks, as ready to soar.

Citing the implementation of QE3 as a catalyst for gold, whereby the price of gold has jumped about 6 percent since August 2012, and the fund he is lead investor on up close to 20 percent since August, he sees that as continuing to be the performance of the asset class and mining companies serving it.

When asked if he sees this performance continuing, Foster said this:

Yes, for a couple of reasons. First, the boards of the large gold companies that have been missing expectations have woken up to the fact that management changes are needed. Some very high profile CEOs and COOs have departed. There has been a shift in focus toward more profitability and less growth. That shift toward profitability, shareholder returns and returns on capital should bode well for the industry.
Second, costs could be coming more under control in the months to come. The slowdown in the global economy caused a slowdown in mining activity across base metals, coal companies and iron ore companies. More labor is now available. Lead times for equipment and materials are shorter. That should translate into less cost pressure as we move through 2013. That could be another catalyst for the industry.

Catalysts that have driven gold and silver up remain in place, according to Foster, and there is nothing to suggest the United States will stop running budget deficits in the trillion dollar range any time soon. Central banks around the world are addicted to stimulus, and interest rates aren't going to come down in the next several years.

Expectations are gold and silver prices will continue to be supported and rise, and that could go on for possibly another decade or so.

As for larger miners, they won't be as desirable a place to invest in until they get a better hold on costs and predictability. Until that happens and profitability becomes the focus, they won't be the best place to invest in within the parameters of gold.

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