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LAWRIE WILLIAMS: Gold will do well in 2018, but not break out – RICK RULE

Credit where credit’s due.  Kitco’s Daniela Cambone is an excellent interviewer on things gold.  She knows her subject well and also her audience and her 4-5 minute video interviews on Canadian/US website Kitco.com are entertaining and informative, both in terms of her choices of interviewees and their opinions.  Last week for example she conducted a series of interviews of key attendees at the Vancouver Resource Investment Conference (VRIC) and most of these, as published on the kitco website, give some excellent pointers to the way some of the industry’s top analysts and thinkers view gold’s short to medium term future and the likely performance of the precious metal itself and associated mining stocks.

Perhaps the standout among the VRIC interviews was that with Rick Rule, nowadays President and CEO of Sprott U.S. Holdings, a key Sprott Group executive whose presentations at precious metals focused events are delivered with humour and insight which always makes them some of the best attended talks at these conferences.    I have known Rick for many years and consider him to be one of the best observers, and predictors, of all things mining, and particularly insightful on precious metals.

Although only just over 4 minutes in length Cambone’s interview with Rule managed to be both informative and hugely relevant with regard to gold’s likely progress this year.  Cambone opened the interview by asking Rule if he thought that gold was on ‘the verge of a break out’ in 2018’.  Rule responded with a straight No!  But before gold investors are too disappointed with this answer, he followed up with the view that gold will ‘do well’ this year, but not actually ‘break out’, but that he felt gold stocks could well do so after several years of underperformance.   

His reasoning: “Confidence in too many things is too high - gold does well when people are afraid of other stuff.”  And at the moment confidence in markets is high however unjustified that might be,  Crptos are still attracting the speculative elements in the market.  Gold’s time will come, but probably not in 2018.

Rule is more upbeat on gold miners, despite miners having lagged physical gold last year.“Gold miners are going to surprise, particularly because of low expectations” he commented.  He thinks the senior gold producers and large intermediates will surprise to the upside with improving quarterly results and free cash flow, but the companies which could have a spectacular year are the level 3 gold miners with good managements which are already producing gold and have good expansion prospects.  Ignore the producers mining less than say 100,000 ounces as there will be no institutional interest in these – they are too small – but the next tier up could fly.

Most importantly, Rule comments, follow mining companies with managements that have strong track records in creating value.  They could do spectacularly well this year and enable the investor to sit back and enjoy the upturn.

So there you have it from one of the best in the business!  Gold will break out, but probably not this year although it should have another year of positive gains, which ties in pretty well with our earlier price prediction that gold will hit around $1,425 this year (see:  Precious metals price predictions for 2018 – gold, silver, pgms).  That suggests a steady increase over the year, somewhat in line with its 2017 performance, so not a spectacular rise - yet.

23 Jan 2018

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com

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