October 2014, Week 5 Edition

New Orleans Investment Conference Expresses “Cautious Optimism” on Gold

I was able to attend the first half of this year’s 40th annual New Orleans Investment Conference. From my own observation, as well as that of my associates in the audience, we were able to pick up some “gems” from these gold experts. Here’s our summary of the conference consensus:

The most common theme expressed was “Gold has probably bottomed, but don’t expect a big rally soon.” There is still some downside risk. Marc Faber even threw out the number $900 as a potential low, but he had no concern that such a low number would last long. He then threw out some fabulously high numbers, including $100,000 gold. Commodities have always bounced back, he said, and they will bounce back this time, too. Most speakers expected the bottom to hold, but they warned of a long, slow, “grinding” recovery, not an explosive rally, barring a dramatic geopolitical crisis. Here are some of their gold forecasts, as compiled by Ray Knight:

Mary Anne and Pamela Aden, co-editors of The Aden Forecast, said that gold’s long-term mega-trend since 2001 is still in force. Gold is on sale. Gold is a good buy at $1,200. It could stay sluggish and even go to $1,000, though that’s unlikely. The downside is limited and not likely to fall much further. It won’t necessarily soar from here and could be uninteresting to many investors for a while, but based on historical patterns, 2015 should see a confirmed bottom and 2019 would be the next price peak for gold. Over the next year, if gold is low, buy it.

Doug Casey, bestselling author and founder of Casey Research, said basically the same thing: Gold is at or near a bottom. Nobody can tell exactly, but we’re close to it.

Eric Coffin, publisher of Hard Rock Analyst publications, said gold is close to a bottom, but the bottom is not yet convincing because of lack of volume that would indicate capitulation in the market. We have seen price capitulation but not volume capitulation. Newsletter sentiment on gold is extremely negative, which should give comfort to contrarians, and physical buying will increase in China and India.

Marc Faber, editor of the Gloom, Boom, and Doom Report, said “Buy gold as catastrophe insurance.” Safe custody is important. He said, “You have to be your own central banker.” Gold could drop to $900 and a lot of miners would go out of business, but gold would not stay there very long. If central banks continue printing money as they have, gold could one day be $5,000, $10,000, or even $100,000.

Brien Lundin, editor of Gold Newsletter and host of the conference, said: It’s inevitable though not imminent that we’ll see higher gold prices. Gold has been bouncing off a low at $1,180 when the Chinese and others buy in. Looking forward, the Fed’s policies of monetary debasement have created a huge overhang of money with QE. There’s no easy exit from its predicament, and every option makes higher gold prices virtually assured.

Robert Prechter, head of Elliot Wave International, was bearish on gold, but he said that gold will turn up when the headlines are most pessimistic, like when they say “Nobody expects gold prices to go up anytime soon.” When you see those kinds of headlines, gold will turn around.

Rick Rule, CEO and president of Sprott Holdings: “You’ve endured the pain, now get ready for the gain.” When, not if, gold regains power in 3-5 years, we’ll look back at 2014 as the good old days of buying opportunities. If we are too scared to pick up on these opportunities now, we will look back and say, “What was I thinking?!” Keep in mind that a bear market is a sale, and bear markets are the authors of bull markets. Pain may continue, but hang around for the gain.

News from Russia, India and Switzerland Support Gold’s Bullish Case

While many gold bugs were in New Orleans, a lot of bullish news was happening elsewhere:

Russia’s Central Bank is accelerating its pace of gold purchases. The website of the Russian Federation central bank says that Russia bought another 1.2 million ounces of gold in September, their biggest monthly purchase ever. (The previous record high was 1.1 million ounces in May 2010.) The September purchase brings Russia’s total gold reserves to 37 million ounces (1150 metric tonnes). So Mr. Greenspan is right. Many major central banks keep loading up on gold.

India’s Diwali and Dhanteras festivals were taking place last week, boosting gold sales 20% above last year, according to India’s largest gold trade group. Both festivals are considered to be auspicious times for buying gold. Now with the wedding season coming up (starting in the third week of November), Indian buyers will once again focus on gold coins, bars and jewelry as gifts.

In Switzerland, public sentiment is rising for the pro-gold referenda on the November 30 ballot there. Basically, the referenda call for Switzerland to back their currency 20% in gold, for the repatriation of overseas gold held by the Swiss, and a measure forbidding the sale of central bank gold. All three measures are bullish for gold’s future. Right now, 45% favor the measures, 39% oppose them with the remaining 16% on the fence, according to an on-line poll of 13,397 voters.

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