EP,
You know all this chatter about China wanting to back their currency with PM and buying 1700 tons of gold and countries wanting to back out of the gold cartel is a story I don't put too much faith in. If a country seriously dissed the gold cartel, say by accumulating the metal or otherwise not playing along, that would it it for their currency. They would get no support from other nations, be kicked out of the club. That's why I can only believe so much of stories like 'China's accumulation of gold and silver will strap inventories and spike the price' or 'China and Japan will unload Treasuries'.
With all due respect to Don Coxe's assertation that at the G7 AG said they wanted a 20%+ haircut in the USD, I also hear Japan said 'no way'. These export oriented countries with little domestic demand to speak of have noone else to blame but themselves. The Chinese banking system is a mess and frankly it could be worse than the US. All this worry about the US monetizing $2bn/wk. Imagine how fast China's money supply is growing if it is growing at 5%+ p.a. and their demand for USD. $2bn/wk is $100bn/yr, just of 1% of the US GDP.
That is why I think I have to share the view that Hathaway is on to something when he picks physical gold. If the mining companies are going to have a tough time with costs, if there is difficulty in acquisitions since they don't scale well, it doesn't bode well for share performance. You need the seniors and mid-tiers running up valuation to revalue the juniors. That is not what we got with CDE's bids and ditto for HMY-the market doesn't seem to like them.
$430 for gold means that gold bumps up against resistance all year and ends where it was in January. Unspectacular. Hathaway probably figures, and rightly so, that over the course of a year you could accumulate/trade gold or silver and have an ACB low enough below year end price to book a decent return. Look at silver, off 4% from its highs a few weeks ago. I'm thinking of accumulating more at these prices with a target for year-end in the mid $7 range. Perhaps with good stock-picking you might do well with juniors, but Hathaway focuses on the mid-tier and seniors so I think I can see where he's coming from.
If gold is rangebound $430 is the ceiling, $414 the floor, and you can minimize commissions, I can see why trading or accumulating would be attractive.
I wonder what else he's thinking, though? I wonder if he's worried about systemic failure and thinks the fund should have a strategy of holding more PM?
David |
