Marcos,
My insomnia excuse? The daylight is so short here that I just lose track of the time. <g>
On gold, this analyst is a short term bull but a long term bear. What do you think of his prediction for gold below $100 ounce? I'm flabbergasted, but he does have a good track record. Are there any existing mining operations with production costs that low?
Analyst has two digits for gold
And they're not nice ones: metal seen plunging
marketwatch.com
By Thom Calandra, CBS.MarketWatch.com
Last Update: 1:28 PM ET Jan. 25, 2002
SAN FRANCISCO (CBS.MW) -- "Gold in the digital age -- two digits!"
That's how Andy Smith, the veteran Mitsui Global Precious Metals analyst, forecasts gold's price in the next five to 10 years: below $100. Smith's latest comments are noteworthy. He drew attention last year as a longtime bullion bear who reversed course and predicted a rally for the languishing metal.
Soon after the Sept. 11 terrorist attacks, when gold flirted briefly with $300 an ounce, Smith placed a $340 price target on the metal. Based in London, he said at the time, "Gold is clearly on death's door with the lack of interest, but these are not normal times."
Gold never hit $340, but Smith's comments and published research, sent to Mitsui's institutional clients, turned heads in the gold trade. He had been mostly negative on gold's prospects for 14 years. See the story.
If ever there was a commodities analyst who came close to the superstar status of an Abby Joseph Cohen or a Peter Lynch, it is Smith. Over the years, Smith's coverage of precious metals, from silver and gold to platinum and palladium, has commanded grudging respect from producers and steady interest from investors.
Yet Smith says he was surprised this week when a small comment he made in The New York Times, that gold is "yesterday's money," drew a slew of e-mail and other comments from gold's tightly knit global band of believers.
"One of the more worrying aspects of my change for 2002 is what a stir it caused -- is there so little going on?" he told me from London Friday morning. "I hoped I was meticulous in arguing the reasons for this call -- but apparently to be a bull is to be a fundamentalist, a zealot. If I didn't know before, with 14 years observing, I know now that the distribution of opinion in gold is unique: a barbell with only the extremes occupied and not much in the middle."
Smith reasons gold prices may head higher in coming months as hedge funds and other daring investors seek alternatives to the stock and bond markets. As reported here, gold is sparking interest from Japanese consumers afraid to sink their money into banks, which will see reduced deposit guarantees starting this spring. Investment demand for gold in Japan rose 54 percent in the December quarter, the World Gold Council says. See original story.
Smith sees a range of $265 to $355 for an ounce of gold this year, with his 2002 target at $315, or 12 percent higher than current levels. It is his five-year to 10-year view of the metal's diminishing value in an electronic world that he admits has rankled the gold industry.
Smith's course reversal comes as gold-mining stocks enjoy gains that appear to lack support from the metal itself. Even with the price of gold, at $279 an ounce, close to a 20-year low, gold mining shares are among the leading stock market performers in Australia and Canada. Gold-oriented mutual funds have been in the black in the United States for a year now, unlike most other domestic funds.
The believers still believe. Some say gold needs skeptical analysts such as Smith before it can shake its 20-year slumber and regain its place as an alternative to the dollar, or the stock market.
John Hathaway, manager of The Tocqueville Gold Fund, argues a weakening of the world's dollar-based financial system will boost gold to levels never seen before. "The price of gold will rise as the dollar-based system of credit and commerce falters under an overload of bad debt, weakening financial institutions, and a stagnant economy," Hathaway says. "The end of the Nasdaq mania marked the beginning of this process. The Enron bankruptcy, de-facto default on sovereign debt by Argentina and a looming financial crisis in Japan are random but high-profile reminders of a deteriorating global credit environment."
Hathaway sees the gold price surpassing $1,000 an ounce in coming years. His comments are found in his just-published "The Investment Case For Gold." The $28 million gold fund Hathaway manages has risen 10 percent in this week's first three weeks. It trades under the ticker TGLDX (TGLDX: news, chart, profile). Stillwater Mining (SWC: news, chart, profile), Meridian Gold (MDG: news, chart, profile) and Placer Dome Gold (PDG: news, chart, profile) are among the fund's largest holdings.
For his part, Smith acknowledges he has yet to state his reasoning for sub-$100 gold in a research report. But it's coming. In 1997, for instance, Smith compared gold's long-term prospects with those of silver, a more industrial metal that has all but disappeared as an investment choice.
"I rehearsed this long view in 1997, likening - in detail - gold's demise to that of silver in late 1800s as central banks grew out of it faster than India could grow into it," Smith told me. "In many respects gold's problem is worse. Its price fate, on this analogy, is somewhere below $100. At that price, gold would 'catch down' with the performance of silver."
Spot gold prices Friday afternoon rose $1.15 to $279.65 an ounce in New York trading. See metals report.
Thom Calandra is editor-in-chief of CBS MarketWatch. He has pledged to dye his hair gold when spot gold's price exceeds $300 for a full week. |
