- Written by Jonathan Brownfield
- Wednesday, 24 October 2007
The investment banking arm of the Royal Bank of Canada recently hosted an invitation only major gold seminar in London. They released a research report which predicts that the bullish upswing in the gold price will likely endure until the end of this decade.
They are anticipating that investors will continue to use gold [and to a lesser extent silver] as a safe haven, especially with the current perceptions of economic uncertainty and global geopolitical risk.
RBC Capital Markets said, "the continued weakening of the US dollar, potentially leading to the unwinding of Bretton Woods II, is another factor increasing the metal's credibility". But they had a warning about a possible correction in the price of gold.
Their analysts believe that a "significant correction" [one that might have already begun] off the recent near record levels is possible. The sharpness of the predicted correction could take the price of gold down to the $725-$750 level, which actually could lead to a nice buying opportunity. That is because they also stated that the price could bounce right back up again to as high as $900 an ounce in the first quarter of 2008.
Mineweb.com reported that Stephen D. Walker, Director of Global Mining Research at RBC Capital Markets commented: "RBC Capital Markets remains bullish on gold and gold securities for the medium-term, and believes the commodity in in a secular recovery"; however the bank's short-term outlook is more cautious.
With the drop recently down to $785 [and perhaps lower by the time you read this] we are becoming buyers of such quality precious metals stocks as Agnico-Eagle (NYSE:AEM), Kinross Gold (NYSE:KGC) and Barrick Gold (NYSE:ABX). We also own some Goldcorp (NYSE:GG), Yamana Gold (NYSE:AUY) and on the silver side, we like Pan American Silver (Nasdaq:PAAS), Silver Standard Resources (Nasdaq:SSRI) and Silver Wheaton (NYSE:SLW).
If you want to own a fund that buys and holds both the physical gold and silver metals, check out the Central Fund of Canada (AMEX:CEF), which we also have been buying on corrections. Our experience is the best time to buy the precious metals and the mining stocks are after a nice, deep correction. "Don't chase the precious metals stocks, let them come to you" has been the advise we've received from our mentors. If we follow that approach, we will welcome corrections so we can "back up the truck", believing that someday we will be able to sell for a handsome profit. Buy low, sell high!