Troubles in the Middle East aren’t having an effect on gold, according to self-taught investor David Erfle. But the US dollar, which continues to strengthen, is a major force.
Self-taught investor and founder of JuniorMinerJunky David Erfle spoke with the Investing News Network (INN) ahead of his talk at the International Mining Investment Conference in Vancouver, sharing his thoughts on where gold might be headed in the near term.
It’s the greenback that’s moving the precious metal at the moment, according to Erfle, who said that he wouldn’t be surprised if gold fell to US$1,280 per ounce if the US dollar keeps heading skywards.
While gold is currently trading at US$1,303.90, at the time of the interview it had fallen below $1,300 for the first time in months.
Erfle also gave tips on how new gold investors might do their homework, having taught himself, and shared an experience where he ended up selling a stock sooner than he would have liked.
Watch the interview for more insights from Erfle on what gold is up to, or read the full transcript below.
INN: In the last year, the price of gold has gone up roughly about $100 a pound. What’s driving that? Are there any signs it’s going to continue or is there a change coming?
DE: Well, if it went up $100 a pound, I’d really be happy. But lately we’ve had the price come out of a consolidation pattern between US$1,300 and US$1,365, it was there for about four months. And since it didn’t break out, basically the shares were telling us it wasn’t going to break out. What doesn’t break out breaks down, so that’s what happened this morning. We had gold slice through US$1,300 and [there’s a] stop run going on in the futures market right now. I wouldn’t be surprised to see US$1,280 gold very soon.
INN: Okay, and what do you think has driven that?
DE: The US dollar mostly. The US dollar has resumed its climb, it’s over 93 again and I wouldn’t be surprised if it hit 95, 96 on the cash settle index. Even the skirmish in the Middle East has not done anything to the gold price, it’s all about the US dollar right now.
INN: And so dealing mostly in juniors, are there any interesting success stories out there right now that your average investor wouldn’t mind knowing about?
DE: Yes. Well, the biggest success story for me, my subscribers and my readers at Kitco has been Novo Resources. I’m sure everybody already knows about that one, but there’s another one that I really like called Marathon Gold (TSX:MOZ). They’re not at the show here, but they’re about to put a PEA out on their Valentine Lake Gold Camp this week. It’s in Newfoundland, and they’ve already proved up 2 million measured and indicated and another million inferred of a little less than 2 grams per tonne. And their PEA’s going to be out this weekend and it should be very good.
INN: Can you share any stories about investment opportunities that you might have missed along the way, ones that you wished that you would have jumped on?
DE: Well, there was one that I had and sold, which was Kirkland Lake Gold (TSX:KL,NYSE:KL). It’s funny, I ended up — I purchased both Kirkland Lake and Crocodile Gold at about the same time. Crocodile Gold was taken over by Newmarket Gold and then Kirkland Lake took over Newmarket, and I ended up selling everything. That was a bad mistake because the share price just keeps going up. But I did really well on the initial investment so I shouldn’t really be complaining.
INN: Can you tell me a little bit about what drives gold? What should somebody interested in gold be watching for tips on where the price might be headed besides your newsletter?
DE: As far as the price of gold in concerned? Well, watch the US$1,250 level, watch that level very carefully. Because if gold goes below US$1,250 that would not be very good because I think the market’s already priced in a solid floor there. So do I think it’s possible to go down there? Yes, I do, because like I said earlier, the US dollar could very easily go to 95, 96 on this run, and if it does then I wouldn’t be surprised to see gold get down to that level.
The shares via the GDX and the GDXJ have been holding up really well here, but today obviously — I don’t know what they’re doing today, but the 21 level on the GDX needs to hold as well. Because if it doesn’t there’ll be some stops run also in the GDX. So watch carefully the GDX level at 21 and watch carefully the US$1,250 level in gold.
INN: Okay. And so you are a self-taught investor. In 2018, what would a new investor starter kit look like?
DE: Well, a cashed-up account without margin, because if you are going to play in this sector you can’t use margin. There’s enough leverage in these things already if you invest in the right companies, but it is a saying that it is a stock picker’s market. My presentation today will be about just that, how to build and maintain a junior resource stock portfolio. You just have to do diligence, make sure that the companies have really good management, are cashed up through, at least through this year, have a tight share of structure, have a project in a safe jurisdiction that has district-scale upside potential. That will weed out a lot of companies because most companies don’t have that.
INN: And finally, is there anything extra that you’d like to add?
DE: My newsletter is called JuniorMinerJunky. It’s juniorminerjunky.com and it’s junky with a “Y.” I started about a little over a year ago. It’s kind of unique, I’ve capped the subscriber base at 200 and I give my subscribers a 24-hour notice before I buy something, that’s why I cap it at 200. I do not take any monetary compensation from any companies. I own shares in all the companies that I cover.
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Securities Disclosure: I, Scott Tibballs hold no direct investment interest in any company mentioned in this article.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.