The Case for Gold
Topics
PLEASE NOTE THAT THIS INFORMATION EXPRESSES THE VIEWS AND OPINIONS OF SEABRIDGE GOLD MANAGEMENT AND IS NOT INTENDED AS INVESTMENT ADVICE. SEABRIDGE GOLD IS NOT LICENSED AS AN INVESTMENT ADVISOR.
Bank Stocks Signaling Higher Gold Price?
This year, bank stocks have traded down hard, performing much worse than broader equity indices. This is usually a bullish leading indicator for gold.
Opinion on the Gold Market
In our opinion, the gold price is a measure of the level of perceived risk in the financial system. We think that risks to the financial system and financial asset valuations have probably never been higher but the market continues to disagree.
Gold's Moving Parts: Bull Market Since New Year
The gold market has probably never had as many moving parts as it does today. There are many factors arguing for a much higher gold price in the current year and we believe that gold has commenced a new bull market since the New Year.
Our Current Views on the Gold Market
We believe gold has bottomed and has entered a new bull market.
The Gold Market: Assessing the Bear Case
We cannot remember a more frustrating gold market. Seabridge was founded in 1999 when gold was trading at US$270 per ounce and that was a difficult market too, but the fundamentals for gold were largely hidden from view (although we saw them coming) and we did not expect a sympathetic response for a start-up company at the tail end of a 20 year bear market.
A Quick Reprise of the Fundamentals
As we have always said (in good company with Jim Grant), the gold price is a reciprocal (inverse) of public confidence in central banks and financial assets-stocks and bonds. We believe that the fundamentals are telling us that financial assets should be trading at much lower levels and gold should be much higher.
Weak Gold Price; Negative Sentiment
As we write this, the gold price is weak and sentiment has never been more negative. Measures such as the Daily Sentiment Indicator have recently hit lows last seen in 1994 and 1997 while MarketVane's bullish consensus and Hulbert's HGNSI index of gold portfolio managers have broken to lows below those recorded in 2008.
America's Debts and Deficit
Gold has now been in correction mode for more than a year. The fundamentals are strong...one central bank after another has embraced monetary expansion, sovereign debt continues to grow, the world economy continues to slow and enormous amounts of public and private debt need to be rolled over at very low interest rates.
Predictions in the Gold Market
Since 2002 we have argued in these pages that: (1) the world's developed economies were floating on an historic sea of credit which was mimicking an economic boom; (2) the credit bubble would burst; (3) the result would not be a deflationary bust because central bank policy would be to expand the money supply and weaken currencies rather than allow a pandemic of defaults; and (4) financial assets and fiat currencies would suffer a crippling loss of confidence, making gold the best performing asset of the next decade or more
The Gold Market
It sometimes seems to us that no investment attracts more negative commentary than gold. In the past six months, investors have been treated to yet another round of high-profile analyses declaring that the gold bull market is dead. Since these analysts are not on record as having predicted the gold market's consecutive 10 year bull run and its gain of more than 600%, why would anyone listen to them? But investors do listen to this nonsense and so it needs to be addressed.