In this update from Sascha Opel, former chief editor of the first newsletter about the German Neuer Markt (New Market), he gives us his current thoughts on the precious metals market. Sascha's company, Orsus Consult GmbH, publishes one of the most popular German newsletters on commodities and junior mining and exploration. (www.rohstoffraketen.de)
The Gold Report: Sascha, we last interviewed you in May 2008. At that time you felt that we were beginning a period of re-establishing gold as currency. Would you review your thinking on this viewpoint for our readers?
Sascha Opel: In our last interview, I said, Long-lasting gold bull markets take place when gold's role as money is being re-established. In my opinion, we are just beginning this period of re-establishment. Those calling for the end of the precious metals bull market any time soon are sadly mistaken. Today, although nine months have passed, we are still in the beginning of that period. Look at the gold price in all currencies around the world – not only in US. dollars. Look at the price in Euro, Canadian dollars, South African rand, Australian dollars, British pound, Norwegian krone, Russian rubles, Swiss francs etc. Gold is now starting to establish new all-time highs in all those currencies. The masses will slowly realize that no paper currency is safe in the near future.
TGR: The world has gone thru a major deleveraging and financial turmoil since our last conversation. How have recent developments changed your view on gold as a currency or as an investment?
SO: I have not changed my view. It is still the place to be as an investor.
TGR: Do investors view gold differently in Europe than North America?
SO: I can only speak for retail investors in the German-speaking countries like Austria, Germany or Switzerland, where we have most of our clients. It was a year or 18 months ago when the first few people from the Street started talking about gold. The last precious metal show for private investors in November in Munich was very interesting: At the booth for Germany's biggest gold- and silver-coin dealer, there were five lines of people buying physical gold. I saw thousands of Euros being changed into real money—gold and silver.
TGR: If you see gold as a currency, what advantage has gold versus other currencies?
SO: For me, what's most important is that gold has no risk of failure, like corporate- or government loans/bonds. These have to pay interest; someone takes the risk to lend them the money. If you own gold you are completely independent from any government or any other institution in the world. You don't owe anyone anything. Because of this advantage you get no interest. But the aim of the international banking cartel and politics in general is to make you dependent. That is probably the main reason why the establishment fights against gold. In their opinion, everybody should put his money into corporate- or government bonds. Otherwise they denigrate you as anti-American or anti-European.
TGR: You believed gold would remain around $800 for the short term. Some newsletter writers are calling for gold to rise above $1,500 by year-end. What is your view on the price of gold for 2009, both short term (the next quarter) and long term (through the end of the year)?
SO: In May 2008, when gold was around US$900, I thought it would go down to US$800 for several reasons I mentioned at that time. We went down to US$720 until autumn 2008. Now we are back at US$900 and will perhaps go up to US$1,000 or US$1,050 at the end of March. So I was very lucky with my prediction. But - as I told you in the answer to your first question – it is very important that gold started to climb in nearly all currencies around the world. In U.S. dollars we will make new highs this year, perhaps by the end of 2009.
TGR: What factors should investors look for as a signal for gold to take off? What factors should investors be looking for that gold has peaked? Should we expect gold to peak in 2009?
SO: I am absolutely convinced that we will not peak in 2009! I believe that the price of gold is manipulated. I believe that we will go over US$1,200 by the end of 2009, but I am not sure if we can defend that level. The establishment surely will do something so that the price will not go too high in too short a time. In looking back at the rise of gold from $35 to $850 during the '70s, the former Fed Chairman Paul Volcker said, It was probably a mistake to allow gold to rise so high. And Volcker now is on the Obama-Team! We will not have a peak like 1980, but gold will rise constantly. Buying on dips like in autumn 2008 is the best strategy, in my opinion. Perhaps sometime later (in a few years, but not '09) gold will start to move US$50 or US$100 for some days in a row to US$2,500 or more. Then I would sell or hedge some virtual gold over the markets (futures, ETFs, short-certificates etc.), but I would not sell the physical stuff!
TGR: In our last discussion, you suggested investors own physical gold, making it at least 5% of their portfolio. Do you still feel it is important to own physical gold given the premiums required to acquire it at this time? Wouldn't owning a gold EFT do the same thing?
SO: I do not trust all these ETFs and other constructions – even if they tell the investors that the gold is held in this or that, or saved in a bank. If you want to speculate for a few months, then ETFs are fine, but not for me. I own gold for other reasons than speculation.
TGR: In May, you felt that junior producers and exploration companies had the potential for the largest returns. Do you still feel that way given that so many juniors/explorers are facing financing problems? Some of our recent interviewees have steered investors to major producers. Their logic is, with prices so beaten down on the majors, why take the risk on juniors or exploration? What is your feeling about this investment strategy? What specific investment opportunities can you recommend to our readers?
SO: I am still convinced that juniors/explorers have the potential for bigger returns. Look at stocks like Osisko Mining Corp. (TSX:OSK), which we bought for our model portfolio in September for C$1.80. Now it's trading at C$4.50. The same with good explorers like Nevsun Resources Ltd. (TSX:NSU) (NYSE.A:NSU), Premier Gold Mines Ltd. (TSX:PG) or Bravo Venture Group (TSX.V:BVG), whose Homestake Ridge Project in B.C. is one of the best discovery stories in North America!
I like well-financed explorers or special situations like potential takeovers – one example is Forsys Metals Corp. (TSX:FSY), a uranium explorer which will be bought for C$7 per share in cash by the end of February and is still trading at 6,25 CAD. Corriente Resources Inc. (TSX:CTQ) (NYSE.A:ETQ) is in talks about the purchase of the company (see news release, 12/16/08). We recommended our readers to buy it at around C$4, like we did in Forsys at C$3.50, because we are relatively sure that Corriente is worth much more in a take-over than the current C$4.50. The exclusive talks about the sale will end on 31st march.
I also like special stories like Commerce Resources Corp. (TSX.V:CCE) (PK SHEETS:CMRZF), a tantalum and niobium exploration company. They have substantial cash in the bank and can play a very important role in the tantalum market in the future. I also still like Miranda Gold Corp. (TSX.V:MAD); they are well financed and have a great management team. For the big ones I like Goldcorp (TSX:G) (NYSE:GG), Royal Gold Inc. (Nasdaq:RGLD) or Franco Nevada Corp. (FNV.TO).
Sascha Opel, former chief editor of the first newsletter about the German Neuer Markt (New Market), Sascha Opel brings a distinctive outlook to the precious metals market. He was also the co-chief editor of Der Aktionaer (The Shareholder), one of the biggest German Stockmarket Magazines and advisor to an investment fund that achieved an outstanding return of 700% in three years. Today his company, Orsus Consult GmbH, publishes one of the most (www.rohstoffraketen.de) popular German newsletters on commodities and junior mining and exploration.
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