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.
At the beginning of the last decade gold was trading at $255 an ounce and by the end of 2009 was trading at $1,100 an ounce. Not many investors thought that that was remotely possible and, at best, highly unlikely. Now some analysts are saying we should see $5,000 gold in a couple of years. Is that likely or just ‘pie in the sky’?
In further edited excerpts from the original article* the author (bullionoutlook.com) goes on to say:
Each calendar year since 2001 gold has posted a positive return, beating out all other investment categories. Specifically, by way of comparison, if you had invested $100 in the year 2001, US stocks would have returned $90, corporate bonds $190, oil $268 and a basket of CRB Index commodities $357 but by far the biggest return for your hundred dollars would have been gold which would have returned a little more than $400.
Gold Demand in Uptrend
– Investors such as hedge funds and pension funds, together with large institutional investors, are buying large allocations of gold.
– Last year, according to the World Gold Council, the third quarter saw a 15% increase in demand for gold from the previous quarter.
– Asia, with a population in excess of 2.5 billion and an affinity for gold, is investing in a big way. China is now offering gold-linked checking accounts and is encouraging its population, with a growing disposable income, to buy gold and, as such, will soon overtake India as the world’s largest consumer of gold.
Gold Seen as a Safe Haven
In times of crisis people always turn to gold and silver. Many countries are in a worsening fiscal dilemma and have created a crisis of confidence for the fiat currencies. Paper money is only backed by the faith of the issuer and as investors lose faith with the issuer, the value of the currency erodes. Under such circumstances investors turn to gold as the ultimate store of value.
Increasing Investments in Gold Mining Stocks
As the price of gold takes off, we will also see large investments in gold stocks. The gold explorers and producers should see returns somewhere in the region of 1000% as it becomes more economically viable to expand their mining efforts.
$5,000 Gold by 2012
In January 2010, Robert R McEwen, chairman and chief executive officer of US Gold Corp, made a prediction that gold could more than quadruple to a $5,000 high by the year 2012.
[$5,000 gold: a possibility – quite likely – or ‘pie in the sky’?]
http://bullionoutlook.com/?p=55
