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Precious Metals Takeovers Push Share Prices: James West
Source: Brian Sylvester of The Gold Report (2/22/12)
http://www.theaureport.com/pub/na/12637
Even in an environment ripe for takeovers, finding and sticking with quality precious metals assets is the strategy that speaks loudest to James West, publisher of the Midas Letter. Read about his philosophical and practical switch from "trader" to "investor" and about which companies lead his list of favorites in this exclusive Gold Report interview.
The Gold Report: James, do we have to rely on a successful Greek bailout to push gold above $2,000/ounce (oz) in 2012, or will that happen regardless of events in Europe?
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James West: I think the latter. The deterioration in European sovereign debt integrity is only one factor pushing gold up. Numerous other forces could push gold down. Foremost is the success U.S. dollar-backed interests in the banking sector are having in pressuring the government to induce positive pricing in commodities and in the markets in general.
The federal government, the Federal Reserve and the U.S. Treasury understand that investor sentiment is influenced by the metrics issued at the close and during the trading day. Influencing those metrics causes equities to be bought or sold; it creates or perpetuates up and down days.
In an election year, President Obama and his advisers are doing all they can to create the impression of a robust, recovering economy, jobs growth and S&P Index growth. The Republican element is more interested in portraying the president as an economic bumbler who has done nothing to spur recovery, is responsible for the continued economic malaise and is an enemy of economic recovery and growth. Those forces obviously are interested in negative economic metrics.
Markets seize up when broad global investor sentiment is negative. Everybody sits on the sidelines, financing and credit grind to a halt, as do hiring and business. Then layoffs start and the cycle becomes actively negative instead of just passively negative. The government understands that and is no longer willing to let markets be unfettered. That's because, if left to a free market, the government's massive debt problem would be interpreted as terminally negative.
TGR: Which would be more positive for gold, a Democratic administration or a Republican one?
JW: I do not think it matters. We measure gold in currencies or we measure currencies by their value in gold. The most direct metric comes down to the quantity of a currency vs. the quantity of gold. Global output of gold is stagnant or in decline, and the availability of dollars, euros, pound sterling and renminbi is in an ongoing, exponential growth cycle. As a result, the price of gold can only rise as measured by that metric.
TGR: The recent merger of Xstrata Plc (XTA:LSE) and Glencore International Plc (GLEN:LSE; 0805:SEHK) will create the world's fourth-largest mining company with a market cap of about $92 billion. Will this precipitate more takeovers?
JW: Absolutely. BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK) and Rio Tinto (RIO:NYSE; RIO:ASX) are constantly threatening to take each other over. Barrick Gold Corp. (ABX:TSX; ABX:NYSE) has an insatiable appetite. It would love to absorb Newmont Mining Corp. (NEM:NYSE) or Goldcorp Inc. (G:TSX; GG:NYSE). The problem is that those transactions would be just massive, especially in the face of the rising gold price.
TGR: Given Xstrata's history of acquisitions-I am thinking of Alcan and Falconbridge-and Glencore's cash reserves, will this merger create a predator on the hunt for takeouts?
