VRIC 2015 Commodities Outlook: Bullish on Gold

One highlight from the first day of the 2015 Vancouver Resource Investment Conference was the Future Commodity Outlook Panel. The discussion took a look at the near-term outlook for commodities prices across the board, as well as what the future may hold for the junior mining sector.

The panelists were: Frank Holmes, CEO and chief investment strategist at US Global Investors (NASDAQ:GROW); Ross Beaty, chairman of Pan American Silver (TSX:PAA) and Alterra Power (TSX:AXY); Gianni Kovacevic, author of “My Electrician Drives a Porsche?” and chairman of Copperbank Resources (CSE:CBK); and Nick Hodge, founder and president of the Outsider Club.

Overall, the consensus was towards bullishness on gold, with a more hesitant sentiment for some of the more “economically sensitive” metals. Here’s a look at what the panelists had to say.

Gold and silver

Beaty pointed to the potential for “macro disruptors” and black swans as reasons for his bullishness on gold, and to a greater extent, silver. “Silver has the other advantage that gold doesn’t have of being in a very powerful, bullish cycle from the standpoint of technology demand,” he said. “So silver has strong demand on the industrial side, plus strong demand on the monetary side.”

Not surprisingly, Holmes is also “very bullish” on gold and silver. “It’s all turned this year. Gold stocks are above the 50-day moving average,” he commented.

Kovacevic stated, “I’ve never been a gold bug. I’ve never been against it.” Overall, he sees prices going higher in the near term, while Hodge similarly sees gold prices moving higher over the next two years.

Hodge also seemed to side with Beaty in terms of silver shining a bit brighter. “I think silver might even do a little bit better because the historic ratio is a little low, so silver could potentially outperform,” he said.

Oil

Beaty’s prediction is for oil to settle in the range of $60 to $70 per barrel “in the next year or two,” while Holmes sees oil bouncing back to between $60 and $80. “By the summer you’ll have oil back up,” he said.

For his part, Kovacevic simply stated of current prices, “oil’s not a business at $50.”

Base metals

Overall, Beaty’s outlook for the base metals sector is a bit mixed. He sees good fundamentals for zinc, and said that nickel is “in reasonable shape.” However, he is more neutral on copper, and suggested that the metal could go back over $3 by July, and might then remain “static around that level.”

Furthermore, he sees other commodities, such as iron ore, as “very oversupplied.” Holmes agrees, but echoed Beaty’s favor for zinc, and for zinc-silver-lead deposits in particular.

Rounding out the panel, Hodge anticipates problems for base metals related to global growth. “As far as the base metals go, that’s a crap shoot too, because global growth just isn’t there, ” he said, adding that “zinc looks okay.”

Other

Interestingly, Kovacevic said he favors platinum-group metals (PGMs) over gold, in part because the metals are used in catalytic converters for vehicles. Hodge echoed that sentiment.

Meanwhile, Beaty was the only panelist to comment on the outlook for uranium. “Uranium is moderately strong, although it’s got its own problems. So I’d see uranium as a moderate outlook,” he said. For other commodities, such as thermal and metallurgical coal and specialty metals, he offered a more bearish view.

When will the junior space turn around?

As well as asking about the reality of a current economic recovery and about possibilities for positive and negative black swans, moderator Rick Rule of Sprott Global Resource Investments questioned panelists about what, if anything, may turn around the junior resource markets.

To start off, Beaty reiterated the adage of cyclical markets. “The metal markets are cyclical. They always have been and they always will be,” he said, adding that he doesn’t know if a turnaround will come in 2015.

Holmes seems to see regulatory hurdles as a big challenge. “I’m a big believer that government policy is a precursor for change,” he said. “The regulatory world is making it extremely difficult for the formation of capital in the junior space.”

Kovacevic agrees, but also holds investors to account, stressing that anyone who invests has a responsibility to educate themselves. Further to the point, he admonished those in the audience to “stop supporting companies that don’t have a plan.”

Finally, Hodge concluded the discussion with a much simpler suggestion for what might turn the juniors around: the passing of time.

“The only reason that the junior resource market’s going to turn around is time, and I don’t have a time frame for you,” he said. “At some point, reserves are going to have to be replenished. Big miners are going to have to buy quality assets. So I would echo Gianni: stay educated.”

Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.