Takeovers the Path to Golden Returns: Sascha Opel

Sascha Opel: We are in the middle of this process. Many people and even central banks have added gold to their portfolios or balance sheets as they realized that no paper currency is 100% safe anymore. The Greek haircut has made it clear to investors that even European government bonds are not safe havens. The money went into German and U.S. bonds. But what happens in the next few years with growing debt in these countries?

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For me, what is still most important is unlike bank, corporate or government bonds, gold has no risk of failure. Bonds have to pay interest to the investors who take the risk to lend the money. If you own gold you are completely independent from any government or any other institution in the world. You are out of the modern financial system. You don't owe anyone anything. Since 2008 it has been clear: gold is the only safe haven.

TGR: Do you continue to buy and hold gold or has it become too expensive?

SO: If an investor bought gold at US$300/ounce (oz), it is hard to buy more at US$1,700/oz. But if an investor still has no gold and his whole portfolio is only based on "paper assets"-cash, bonds-then it makes sense to convert some paper into hard assets like gold and silver.

TGR: Do you believe gold will push above the US$2,000/oz threshold in 2012?

SO: I do not know. In our interviews in 2008 and 2009, I was very lucky with my gold forecast. As I am convinced that the so-called "Euro Crises" will be solved soon-the European Central Bank (ECB) is buying time until 2015 with its three-year 1% tender for the banks-I think the big buying from European and even U.S. investors that we saw in the last few years will take a break this year.

But central banks in Asia used the last correction to add gold to their balance sheets. I am convinced that China is still on the buying side as well. It has not announced its gold holdings since 2009 when it was 1,050 tons. But one thing is obvious: China wants to establish the yuan as a global trade currency in the future. And the Chinese know that if the Chinese Central Bank has large gold holdings, confidence in a free trading currency might be much higher. The U.S. has more than 8,000 tons of gold, Germany has 3,400 tons, the central banks of the entire Eurozone own more than 11,000 tons of gold. My conclusion: China will add several thousand tons to its holdings in the next five years or so.

And that is one of the main reasons why I think gold will not move much over US$2,000/oz this year. Perhaps we see US$2,000/oz shortly. But most of the central banks that want to buy gold are not interested in such a high gold price and even the Federal Reserve and ECB are not interested in the strong rise of the gold price over a short period. I think we will see another 10-15% climb by the end of 2012, which means something around US$1,800-1,850/oz by year-end. In a few years-or perhaps next year-gold will rise above US$2,000/oz if the devaluation of all major paper currencies continues.

TGR: Your company, Germany-based Orsus Consult, publishes one of the most popular German newsletters on commodities and junior mining and exploration. Most of the companies you write about are Canada-based companies with additional listings on the Frankfurt Stock Exchange. But the decline of the junior sector in the second half of 2011 took a heavy toll on the junior mining sector and the German market suffered, too. What is the current appetite among German retail investors for junior mining plays?

SO: There is still an appetite for good exploration stories over here. But the 2008-09 collapse in the juniors wiped out many investors. The investors who are still in the business are much more careful. There is no more euphoria; it has been replaced by realism. Another problem pre-2008 was a large number of unserious "pump-and-dump" promotions. We always tried to help investors identify such bad promotions. But many retail shareholders at that time lost money with these highly promoted stocks as well as with good-quality stocks. In the end they saw no difference between the good ones and the bad ones: they all lost money. Many investors sold their stocks and were not involved anymore when many of the good stocks we followed came back or were later taken out, companies like Premier Gold Mines Ltd. (PG:TSX), Osisko Mining Corp. (OSK:TSX), Corriente Resources Inc. (CTQ:TSX; ETQ:NYSE.A) or Potash One Inc. (KCL:TSX).