Mr. Gerbino: The status is as follows; money managers, sovereign wealth funds, and investors globally have lost some or a majority of the faith and trust that they have had in major financial institutions, politicians and governments regarding economics and the future. Therefore, gold, which has never gone bankrupt and has never defaulted and has always had a reputation as a safe monetary substitute and an inflation hedge, has now become in the forefront of everyone's minds for a portion of their wealth or investment funds. Also, I might add, gold allows investors a piece of mind from an insurance standpoint in the event their monetary and economic events get out of hand. Even though that is a low probability, one also doesn't cancel one's insurance policy if you feel having an accident while driving would be low probability. Now, when one adds in the possibility of just 4% to 5% inflation rate taking place, and extends 4% or 5% increase in the price of gold - which at these price levels is somewhere between 50 and 60 an ounce - year-after-year, mining companies benefit from this dramatically because once the capital has been expended to put a gold mine in production, the next 20 years or so is strictly extraction costs. Therefore, this major capital expense is fixed and one can benefit from the higher price of gold going forward where the margins are increasing.
TWST: Do you think the precious metals market is going to continue doing
well over the next year or so?
Mr. Gerbino: I think gold will be in a trading range of somewhere between
850 and 1,250, probably for the next year or two or three. The next big move
up in gold will occur because of inflation coming back from all the money that's
been created to bail out the banking institutions in most countries in the
world. The bottom line is more money equals higher prices. That is a trend that
history attests to over thousands of years.
Tickers included in this excerpt: AUY, ELR:TSX, FNV:TSX, GG, NG, SLW
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