Casey...interview of Rob McEwanSUBJECT: Casey...interview of Rob McEwan at the
thanks to GF
Interesting piece from the Casey...
interview of Rob McEwan at the
Vancouver Conference.
CR: And what are your views on gold?
Are we at the beginning or the top of the cycle here?
Where do you see it going in the coming years?
Care to make a prediction?
RM: Sure. By the end of ’08, I think it’ll
be testing $850.
Between’09 and the end of 2010, we’ll see it go
significantly higher.
You could inflation-adjust 1980 dollars, and you’d
be at $2,200/oz.
You could use the low-to-high factor from the last
big cycle, from when they freed gold in 1971 to
the peak, which was about 20 times—from $40 to $850.
So, if you put that factor on the low we’ve seen
in this cycle, you’d be at $5,000/oz.
If you go in and do the Dow/gold ratio, if you used
a ratio of two-to-one, and let’s say the Dow loses
60%, as it did over the ’29 to ’39 period, you’re
at $2,250/oz.
If you use one-to-one, you’re at $4,500/oz.
If you say the Dow is going to do just what it did,
’66 to ’80—basically stay flat—using a two-to-one
ratio, you’re at $5,500/oz.
One-to-one, you’re at $11,000/oz.
I was reading Marc Faber, who was asking why it
couldn’t be ½-to-one—and you go up again.
And if you look at ’99 and ’01, you had a different
mood in the marketplace than today.
You had lots of supply, and production going up,
and costs going down, and in ‘01 cost of
production was $160/oz for a while, and you had
hedging being a favored tool, and you had
central bank selling, and rumors that they could
flood the market with more.
You go a couple years out, and you get
the Washington Agreement to quantify the gold
sales and put some brakes on it.
And now you’ve got gold production going down,
you have costs going up—$270, as opposed to
$160—hedging is largely nonexistent, although
we’ve seen the creation of the largest hedge
book in the world now, with the largest gold
producer in the world [Barrick].
Central banks are no longer selling.
There are rumors of Russia, South Africa,
Argentina buying—China going into that space
as well as some of the Islamic nations.
And there’s the ETF, a product of the World
Gold Council, the heart of the hedgers, eating
them for lunch right now because it’s so
popular.
The price is running up—it’s a huge source
of demand.
So, you have supply over here, now we have demand.
When I look at the gold market, I break it down
into three steps.
The first step was from ‘99 to ’04, when gold was
moving just against the dollar.
And then from the start of ’05, particularly with
the euro tripping in the summer of ‘05, you’ve
got a big swing in the other currencies vs. gold.
So, the audience went from being largely the U.S.A.
to being the world.
Somewhere in here, maybe from ’05 to ’08, gold will
test the old highs and after that, I think we move
into the end of the market cycle, which is the
exponential slope that comes with every mania,
and who knows where it goes.
But if you look at the last cycle that did that and
look at ’79-’80, gold took off and the shares were
left behind.
It was such a rapid rise in January of 1980, we didn’t
see the peak in gold stocks until September.
So, it’s a question of how you play that.
Do you play the gold?
Or do you play the stocks?
Homestake was up 500% in ’29 to ’39 and again in ’66
to ’80.
Gold was only up about, say, 70 percent, the first time,
by government edict.
The other time it was up by almost 2,300 percent.
I think the seniors could double, maybe triple
from this point.
https://www.goldcorp.com