I just came across this in one of the Halifax papers-nothing about REGL but a general commentary on pog.
hfxnews.southam.ca
Saturday, January 10, 1998
Gold bugs mine only bad news during '97
By James Daw -- Money Talk
YOU MISSED the ground floor of a golden opportunity in
1997, but don't worry. You may get several more chances.
Gold just touched an 18-year low, and could well head lower.
So the ideal moment has not passed you by, if you dare to step
on board.
In terms of raw buying power, gold has slumped to the levels in
the United States of early 1973, two years after Washington
ended its guarantee to convert U.S. currency into gold on
demand.
So gold bugs are feeling nostalgic and somewhat fortified. Their
brave assumption is that this is near the bottom of the elevator
shaft and that the gold price will soon be heading up.
Few can see it getting back up to $800 US an ounce, as it was
when oil was also at its pinnacle price. Some do, however, live
in hope that gold will eventually reach the near $500 price level
of just a decade ago.
The optimists could be right, or just wrong again.
Pierre Lassonde, vice-president of Franco-Nevada Mining
Corp., said last November "it is very hard for me to see the
gold price moving out of the $315-$365 per ounce bracket for
the next year, or the next three for that matter.''
His lower price estimate turned out not to be the ground floor.
It was the upper-mezzanine level at best. Gold fell to $283 in
December before a brief rally made Lassonde and other gold
miners the hottest tickets in town once again.
Any uptick for bullion will produce roughly triple the bang for
investors in some gold miners. An even bigger bang is possible
with the stocks of exploration companies - remember Bre-X
Minerals? - or with the half of the world mines that can't even
make a buck with gold at $320 an ounce.
But December's gold-price rally was short-lived. Gains that
pushed up Toronto gold stocks an average of 12 per cent in the
month were unwound quickly on Monday, when gold touched
$280. Prices of major Canadian gold stocks were left 44 per
cent below the levels of a year ago. Gold recovered to $284
yesterday.
Gold has seen huge swings in buying power over time. Using
1835 as a base year, it's now under-priced by 12 per cent. But
it was 54 per cent under-priced in 1970 and 274 per cent
over-priced in 1980.
Speculators betting heavily against gold were rewarded this
week by some influential soul-searching and some desperate
Seoul searching.
Alan Greenspan, the one man capable of throttling or gunning
the U.S. economy, mused in a Saturday speech about the
potential for widespread deflation, as happened during the
Depression of the 1930s.
Others, including the governor of the Bank of Canada, have
warned about the risk of triggering a fall in prices and incomes.
But the chairman of the U.S. Federal Reserve Board carries
more weight.
Meanwhile, housewives in Seoul, South Korea, lined up
Monday to cash in countless numbers of gold wedding,
birthday and anniversary gifts. Major industrial conglomerates
there have launched a national campaign to convert gold
baubles into needed Yankee greenbacks.
Neither Greenspan's concerns nor the related economic turmoil
in the Far East are friendly to gold bugs. Both could cool
interest in gold and heat up interest in U.S. bonds.
Martin Murenbeeld of Victoria, B.C., publisher of the weekly
Gold Monitor and a trusted source for gold miners, worries
about the Korean gold hunt.
"This is not good news,'' said Murenbeeld, who had already
guessed that gold could dip as low as $250 this year.
The Far East accounts for the bulk of world demand for gold,
mainly for jewelry. India is the world's biggest market, with
demand up 44 per cent last year, while South Korea is eighth.
Gold hoarders in most countries are relieved that the price of
gold in their local currency is still higher than it was late in
1995.
Net bank sales were equal to about 20 per cent of what all
mines dug up in 1997.
This trend has prompted the reticent Peter Munk, chairman of
Canada's Barrick Gold Corp., to seek the world stage at
conference in Davos, Switzerland, Jan. 31.
He'll chastise central bankers for helping to devalue their own
reserves through their extra sales and through their loans to
speculators.
Whether Munk's speech will help is anyone's guess.
Just remember before you bet too heavily on gold: Barrick is
hedging its bets for lower prices. |
