Penbar Capital Ltd V.PEM

GOLD TO GAIN

[prospector7]

Gold To Gain As Currency, Inflation Play-Fund Manager
04/02/09 13:08

By Matt Whittaker
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Gold prices appear set to rise over the short to
intermediate term as investors buy the metal as an alternative currency,
and there may be more gains in store longer term if inflation increases
when the economy exits its recession, a precious metals fund manager
said Thursday.
Even though he sees prices rising, Mark Johnson, portfolio manager
with the USAA Precious Metals and Minerals Fund (USAGX), said gold
mining stocks are likely to outperform the commodity itself as input
costs decline, boosting margins.
"We're anticipating much wider profit margins in 2009," Johnson told
Dow Jones Newswires in an interview. "This is the year for the stocks
rather than the commodity."
In the short to intermediate term, gold prices are likely to be strong
as the amount of paper currencies grows with government financial and
economic stimulus efforts, he said. Investors often buy gold as an
alternative currency.
As the Federal Reserve's quantitative easing continues, the effective
printing of money will likely lead to higher inflation in the longer
term whenever the U.S. emerges from its recession, Johnson said. After
that, he does not see the Fed draining money out of the system quickly
because the central bank will want to make sure economic strength has
taken hold and avoid a "double-dip" recession.
In addition to its role as an alternative currency, investors buy gold
as a hedge against inflation because they see it holding its value more
strongly in an environment of rising prices.
In recent years, gold as a commodity has outperformed stocks of the
companies that explore for and produce the metal because company margins
were squeezed by rising input costs, such as those for oil, and by
tightening credit.
But that is changing as the metal's price rises while input costs
fall, Johnson said.
As for companies, Johnson said AngloGold Ashanti Ltd. (AU), the
world's third-largest producer of the precious metal, is probably the
best-valued senior gold company.