Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Newspaper clipping from 30 September 2008
Despite the weakness going into the second month of the year, at around $1,230 an ounce on Monday the metal is still trading up nearly $50 or almost 4% in 2015.
Taking a break from short-term fluctuations to take a long term view can be refreshing and California-based investment site Gold Eagle provided an abundance of just that on Monday.
Gold Eagle published a wide-ranging interview with Munich-based gold market analyst Florian Grummes that offers a fascinating picture of what investors may expect from hard and paper assets over the next several years including this 200-year chart.
GOLD-EAGLE: In light of the US Fed fueling US stocks via the levitating action of Quantitative Easing (QE), do you foresee an imminent crash in the S&P500 Index during 2015? And If so, what percent do you expect US equities to crash?
Grummes: Without a doubt, the air is getting thinner…but so far there is no sign of an immediate burst of the US stock market bubble. Instead we could still see some type of final mania phase. You have to be careful, central bankers can buy more time than you can stay solvent! Also let me remind you that trends are lasting much longer than anybody can imagine. Looking at the famous DowJones/Gold Ratio, the DowJones could still rise to maybe 20,000 points, while Gold still could fall to around $1,000-$1,050. They would then meet at a ratio of about 20, which is pretty much in the middle of the 200-year trading channel. From here things should change again and the precious metals bull market should return, while the stock markets should go down. This would be similar scenario like in the 1970ies. Remember, over a long period of time (years and decades), Gold and stocks are two different diametric asset classes… meaning when Gold goes down, stocks are up and vice versa.So to come back to your question over the next couple of months I don’t see a stock market crash — rather I expect a final bull market rally and a final sellout in gold. This should bring the Dow/Gold-Ratio to around 20 and should mark the end of the artificial recovery in stocks and also end the bear market in gold. Over the next 5-10 of years I see Gold and Dow meeting at around 1:1. Depending on the amount of worldwide artificially created liquidity, this could mean that they will meet at 5,000, 8,900 or even 15,000 to 20,000.
Source: Gold Eagle, Florian Grummes
Continue reading at Gold Eagle.
Image of newspaper excerpt from 30 Sept 2008 by Scorpions and Centaurs
