Although he expects gold to be under pressure over the short-term, Brien Lundin remains "exceedingly bullish" over the long haul. The editor of Gold Newsletter also highlights some bargains in the sector.
Steve Halpern: Joining us today is Brien Lundin, resource sector specialist and editor of Gold Newsletter. How are you doing today, Brien?
Brien Lundin: I'm doing great.
Steve Halpern: Glad to have you here. In recent months, you've been cautious on the outlook for gold and you recently said that the near term presents little hope for the bulls. What factors do you think are currently holding down the gold market?
Brien Lundin: Well, it's taper talk and taper expectations, and it can all be boiled down to that. The economic data has been mixed, but generally more positive over the last four or five weeks or so, and I think that the market is looking for the Fed to begin tapering, not this year, but earlier next year than the recent consensus had held, so that's holding gold down.
The fact that physical demand in India for the Diwali Festival was not as great as some had expected, or hoped, helped hold gold down a bit.
There really isn't much in the near term future that could boost gold, except for, perhaps, some dour news on the employment front that would come early next week, or next Friday for the November numbers, and possibly some rising Middle East tensions, or an Israeli attack on Iran, and I think that's probably been put off for a little bit by the recent agreement—although it has not been eliminated, by any means.
Steve Halpern: Now, despite short-term weakness in the gold market, you're convinced that the long-term outlook remains exceedingly bullish. Could you outline some of the reasons behind your long-term position on gold?
Brien Lundin: Quite simply, it's debt, and money, and too much of both. The western nations and the western economies have built up tremendous debt loads, over the last couple of decades actually, and these debt loads are now too large to be addressed without some significant depreciation, or devaluation of the fiat currencies.
The key point is that these fiat currencies—these currencies that are created by keystrokes and printing presses and not backed, or not tethered to gold, or any physical tangible asset in any way—these currencies will be devalued, not against each other, but against gold and other tangible assets.
In other words, the nations, and primarily the ECB and the Fed, will depreciate or create more currency, more dollars and more Euros, to make the value of the debts that they have right now less, but they will pay off those debts in cheaper currencies.
That's the only real out, and it's the way out of a significant debt load that nations have chosen for millennia, and that will prove to be a fact once again.
As we go forward, virtually every economic scenario demands that there will be some depreciation of fiat currencies, and therefore, gold and other tangible assets will rise in response.
Steve Halpern: Now you run the New Orleans Investment Conference, which brings together a wide variety of experts in the gold markets and other hard money areas, and you just completed that latest conference. Could you give us a sense of the general sentiment among the speakers at the conference?
Brien Lundin: Most of the speakers were pretty much in agreement that the near term doesn't look too positive for gold. There aren't a lot of drivers for the metal, positive drivers for the metal, in the near term.
But virtually all the speakers look at the same economic scenario I just outlined and recognize that this is the bottom of a cycle, and that this is the time when the real money is made by those with the courage to invest, and frankly, the cash to put to work in the markets.
I think, as important as the speakers, was the mood among the attendees at our conference. We attract a very high level of retail and individual investor, someone who typically self-directs their investments, and is a bit of a maverick investor—thinks for themselves.
The people that came to the conference this year—at a significant bottom in the metals and mining markets—they've been distilled down to the investors who really know how to play these cycles. I was surprised at the excitement and optimism among those investors, in being able to pick up some bargains at these low levels.
Steve Halpern: Now, speaking of bargains, within the gold, silver, or general resource sector, are there perhaps some specific investment ideas that you would share with our listeners, who are taking a long-term approach at buying into the current weakness, looking out over the scenario that you've let out for long-term rise in the metals market?
Brien Lundin: Absolutely. Generally, I think that investors have the chance to buy companies that have proven resources. They've actually made a discovery and they're just, either outlining or detailing that discovery and moving into development, or they're in the process of enlarging it through drilling.
Companies that have proven resources can be bought now for the same cost as companies that were just grass roots exploration outfits without any discoveries a couple years ago. In effect, this down cycle in the market allows you to buy resources for very inexpensive levels—at bargain basement clearance sale prices.
Steve Halpern: Now, are there any specific names that you'd be comfortable mentioning?
Brien Lundin: Yes, I like Kaminak Gold Corp., the symbol is (KAM) on the TSX Venture Exchange. They have about a three million ounce resource in the Yukon that continues to grow in great management.
I also like Midas Gold. They have a US-based gold resource that's growing and is also well-managed. That symbol is (MAX) and it's on the Toronto Exchange. That's MAX.TO under most quote services. Those two, I think, are very good bargains right now.
Steve Halpern: Well, thank you for joining us. We appreciate your ideas.
Brien Lundin: You're welcome.
