Editorial Gold Gold Gold – Leading the pack

As exploration ’86 grinds to a close, we must admit feeling somewhat disappointed that, despite one of the biggest programs of exploratory drilling for gold ever seen in this country, no major new discoveries appear to have been made — certainly nothing of the Hemlo ilk. But we haven’t lost our faith in these elusive prizes. Fact is, gold production in this country is rising steadily and will continue on this course. It’s certainly on target for turning out 100 tonnes in this coming year. Furthermore, the exploration- development pace is not likely to slacken, for the current price (in Canadian dollars) remains at a highly profitable level, with little chance of seeing any significant decline. In our book, gold continues to be the brightest star in the mining firmament.

While the world’s output of the yellow metal is rising steadily, so is the population. And of the some 5 billion souls now occupying this planet, there are very, very few who do not yearn to possess some gold in some form. Indeed its demand — jewellery, coinage, monetary, industrial, investment etc. — is broadly and deeply based.

Production from South Africa, which accounts for about 55% of the wo rld’s gold output, has peaked. Indeed there could be some serious disruptions there, given the grave political unrest in the troubled land.

Printing presses worldwide are pouring out paper money at an awesome clip, as country after country plunges ever deeper into debt (Canada and the U.S.A. included). Debt crises in many of the Third World countries are like a ticking time bomb, threatening to explode at any time. Mexico, Brazil and the Philippines are but three examples. Something just has to give. But whatever, it’s going to be bad news for the international banking fraternity. The International Monetary Fund and the World Bank surely have a tiger by the tail here. And both are virtually broke.

More than ever,then, this would seem to be the time to hold some gol d or shares in gold mining companies. For this is still the best hedge against uncertainty and international crises — just one more reason why we continue to like gold. And we are not alone. To wit:

* “The enormous build up in external liabilities portends a foreign exchange crisis of major proportions. Gold will probably soar well beyond its all-time high in the not too distant future. Long term investors should recognize this once-in-a-lifetime opportunity and overweigh their portfolios with gold” … from Friedberg’s highly respected Commodity & Currency Comments.

* “We are forecasting that gold will remain in the $400- $450(US) range for about 6 months and will surpass the $500 level during 1987. Reasons include the continuing weakness in the U.S. dollar, a slow but steady increase in worldwide inflation, and the absence of a significant real rate of return in risk-free short term debt instruments” … Mike Pickens, Yorkton Research Group.

* “The might or plight of the U.S. dollar remains the key to the bullion market through to year end at least, and a $500(US) price objective does not seem unrealistic” … David R James, Richardson Greenshields of Canada Ltd.

* “With average gold production costs now in the range of $200-$250(US) per ounce and the price close to $400(US), cash profit margins for the existing producers are high. And the choice of potential investment vehicles in the gold area has never been greater” … John W Lydall, First Marathon Securities Ltd.

Volatility in the price of gold will never be eliminated. While we t end to shy away from trying to predict just what price it will be commanding a year hence, we firmly believe that it will be higher than prevailing levels. And there would be nothing wrong with that. YES,WE DO INDEED LIKE GOLD.