The Conversation (0)
What do Bart Melek, David Morgan, Martin Murenbeeld and Peter Spina think about gold, the US dollar and the removal of the Swiss franc cap? Read on to find out.
Cambridge House International’s 2015 Vancouver Resource Investment Conference ended with a precious metals panel moderated by Rob Levy and featuring Bart Melek, TD Bank’s head of commodity strategy, David Morgan of the Morgan Report, Martin Murenbeeld, chief economist at Dundee Capital Markets, and Peter Spina, president and CEO of GoldSeek.com and SilverSeek.com.
Levy, who’s the managing director at gold and silver dealer Border Gold, took the opportunity to ask the panelists questions that have no doubt been on gold market participants’ minds heading into the new year, and they were only too happy to provide candid answers. Here’s a look at some of the highlights.
Precious metals sentiment
To start, Levy asked the panelists to think back to September 2011, when gold reached its peak in US dollars. Since that time the yellow metal has of course taken quite a beating, so his question for them was whether they still see opportunities in precious metals.
- Melek: “What I think is exciting is the fact that we are very unlikely to see any monetary tightening from the Federal Reserve for the foreseeable future,” said Melek, adding, “that of course means that in real terms, opportunity costs of holding precious metals like gold are more than likely to drop at least for the short run, and that represents a big inflation risk down the road. I think gold is again becoming a safe haven for investors.”
- Morgan: Morgan was similarly optimistic, noting, “I would say in a global perspective, gold really hasn’t been that bad. In fact, in certain currencies it’s done quite well.” He also quipped, “definitely the fundamental fact about gold being the ultimate currency hasn’t left the consciousness of those that are wide awake.”
- Murenbeeld: Making an interesting point, Murenbeeld said that gold achieved its highest p.m. fix ever on September 6, 2011, when Switzerland introduced its cap against the euro. “That maybe took a bit of the safe-haven appeal out of gold … and now that the Swiss National Bank (SNB) has removed that cap, it kind of puts some safe-haven demand back into gold,” he said.
- Spina: “In 2015 I feel a real bullishness starting in the precious metals sector,” said Spina. He’s encouraged by the SNB’s action last week and also noted that “gold could easily see $1,350, upwards of $1,500 this year in US dollar terms.” That would be positive for investors of course, but also for miners operating in foreign jurisdictions and selling their product in US dollars. “There seems to be good timing maybe now to be investing in some of the mining companies,” he said.
Gold vs. the US dollar
As those involved in the precious metals space well know, gold tends to fare badly when the US dollar is doing well. On that note, Levy asked the panelists if they see today’s strong US dollar as a headwind for gold.
- Melek: “Typically speaking, a stronger greenback is a negative for gold — in fact, it’s a negative for most commodities,” Melek explained. However, he believes “it is very likely that the European Central Bank (ECB) will participate in some sort of quantitative easing very much like the Fed has done.” Gold may be boosted as a result.
- Morgan: People want safety, Morgan stressed, and “the most trusted asset class by the masses is the US dollar.” That said, he thinks that as some market participants head toward the US dollar, the smartest money will move into gold, the “ultimate currency.” In the end, he sees investors losing faith in the US dollar, “and when that takes place, you certainly want to have a gold position.”
- Murenbeeld: Keeping it simple, Murenbeeld said that while “there is normally a negative relationship between gold and the dollar … in theory it doesn’t have to go that way.” For instance, “if the Fed has a very easy monetary policy and the ECB has a policy that’s even easier than the Fed’s, you’d expect, all things equal, the dollar to rise against the euro. But the fact that the Fed is easy, it’s just that others are even easier, could also mean that gold would rise against the dollar.”
- Spina: Like Morgan, Spina believes that “the herd mentality will go into the US dollar thinking that’s the ultimate safety, the ultimate currency.” But, he asked, “once the crowd realizes that the dollar isn’t safe, that there is going to be additional easing, additional printing … where are they going to go?” In his opinion, gold and silver will be two places the money heads.
Swiss cap implications
Finally, Levy asked the four speakers what the removal of the cap on the Swiss franc means for the market. That’s a question that’s no doubt been plaguing many since last week’s SNB announcement, and it seems that the panelists have also been pondering it.
- Melek: In Melek’s opinion, the move is a signal “to the broader market that the ECB is getting ready to print more.” He added, “it tells me that the market is quite worried about inflation down the road and debasing the euro, and they’re seeking safe havens — and gold is one of them.”
- Morgan: Morgan sees the SNB’s decision as a sign that “we live in a world that cannot be predicted,” and pointed out again that it’s natural for people to seek safety. He believes that gold and silver “are the most logical money that you can have.”
- Murenbeeld: “Crazy policies come to an end,” said Murenbeeld. “There are some other crazy policies out there having to do with currencies. Some of these currencies are seriously out of whack … the euro is too lowly valued, as are most of the Asian currencies. And one day … you’re going to have a day of reckoning.”
- Spina: Echoing Morgan’s words, Spina said, “that was a very shocking move, and I think the lesson from that is expect the unexpected.”
The comments above display some much-needed optimism about precious metals, and gold in particular. It will no doubt be interesting for investors to see whether the predictions made by Melek, Morgan, Murenbeeld and Spina ultimately hold true.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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