Gold Is On Sale in US Dollars Compared to Other Currencies (Video)

Rob McEwen provided Kitco with an insider’s view on the mining industry and physical gold investment. McEwen was the founder and former CEO of Goldcorp, the world’s fourth largest mining company, so his insights into precious metals should not be taken lightly.

McEwen had 3 very important observations for investors:

1. If prices remain this low, there’s a possibility of gold and silver supply shortages as miners produce less.

2. Monetary expansion by central banks around the world has already created inflation – just look at the real estate and stock markets. This is extremely bullish for gold.

3. Don’t lose track of the big picture by focusing on the price of gold in US dollars. In fact, priced in dollars, gold is effectively “on sale” right now by as much as 80-90%:

I look back to 2001, and gold was $250 an ounce. By 2004, it had moved to about $400 an ounce, in dollar terms. But in most other currencies, it hadn’t moved much. Then in 2005 [and] beyond, all the other currencies caught up to the dollar and gold kept going higher. Right now we have the inverse of that, where gold is going up in other currency terms, but not the dollar. At some point, it’s going to move in dollar terms as well… Buy [gold] in the dollar; it’s cheapest in the dollar right now…”

Highlights from the interview:

“[Miners] are looking for ways to bring costs down. There’s a lot of rationalization of expenses going on, deferral of exploration and other projects. In our case, we were able to increase our production. The grade was better as well… [Our all-in sustaining costs are] $914 [per ounce of gold]…

“The capital markets are basically dead for the industry right now. How do you put new projects on? I think investors will start looking and saying, ‘You know, there are not as many mines being built. And those mines that are being built are producing less.’ Maybe we’re going to end up with a shortage of certain gold and silver…

“No one [in the mining industry] is paying any attention to it [the gold price environment]. You know, in this market, people are looking at the gold price going down. But if you’re in Australia, you’re in Europe, you’re in Canada, the price has been going up because of the foreign exchange. So I look back to 2001, and gold was $250 an ounce. By 2004, it had moved to about $400 an ounce, in dollar terms. But in most other currencies, it hadn’t moved much. Then in 2005 [and] beyond, all the other currencies caught up to the dollar and gold kept going higher. Right now we have the inverse of that, where gold is going up in other currency terms, but not the dollar. At some point, it’s going to move in dollar terms as well… Buy [gold] in the dollar; it’s cheapest in the dollar right now…

“[I’m bullish on gold for] the same reason as before. With interest rates at close to zero, everybody is believing you can take on as much debt as you want. At some point, rates are going to move up and it’s going to be hardest to service that debt. The monetary expansion has been massive. All you have to do is look through economic history to see that when you expand the money supply by the degree that the Fed has and the European Central Bank [has], nothing good comes out of that in the end. People say there’s no inflation, but take a look at real estate. Take a look at the stock market. Take a look at high-end art. All those are manifestations of huge amount of cheap money coming into the system. I think it’s prudent for anyone with a good performing portfolio to start saying, ‘Maybe I should put a little bit into gold right now.’ It’s very cheap – think of it as 80-90% off when you’re walking along, looking for a sale. It is value. You can turn gold into cash in two days…”

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