Conference Shows Signs of Stimulus Withdrawl, Gold Drops
COMMENTARY–ProspectingJournal.com–The recent World Resource Investment Conference in Vancouver was an impressive gathering for grumbling, doomsday predictions and cheap, cheap stocks. Compared to similar conferences last year, this year’s show was even more gloomy, which is saying a lot, and stocks were on an even bigger sale.
Of course, if you were there and listed to legendary contrarian investor Doug Casey, most of the stocks at the show were “crap” anyways, simply relics of what Casey referred to as a near-extinct, pump-and-dump business model. Although anyone who works in the junior exploration markets may be quick to attack such a claim, I couldn’t help but notice the words “QE” in every second conversation. Unlike last year, it seems that those who circle the mining industry–brokers, stock pumpers, drug dealers, etc.–are now, finally, aware of just what makes stocks go up in the current marketplace. Stimulus: another credit card heaved onto our exponentially growing pile of IOU’s.
Sure, the mining industry is going through a summer lull of slow volume and tightening liquidity, which is nothing new, but the atmosphere at the World Resource Investment Conference was unarguably doom. Even the speakers had almost nothing good to say. Frank Holmes attempted an appeal to our dumb “luck at simply living in the first world,” but the consensus was that everyone should probably go buy some silver and gold. Casey told us, shortly after admitting that he is “fat and old and not very energetic,” to get out of this country and stop acting like “milk cows” for the government. Logical hurricane Peter Schiff said Canada needs to start selling everything to China but consider employing US nannies when the American dollar tanks. And Michael Barry, he said perhaps the most disturbing thing of all: that there is no real consensus left at the Federal Reserve and that most of the staff who work there are very worried about the future direction of the US.
Shortly after the conference, gold bugs held their breath as Ben Bernanke delivered an address on the Fed’s current operations. Bernanke said nothing of “stimulus” or “QE” other than the usual drab mentioning that the Fed is prepared to step in with easing measures if the US economy goes under the bus. While the Dow showed a strong performance shortly after, gold bugs went into their closets and wept as the news once again took the precious metal down a couple pegs. As most are aware at this point, the yellow metal’s upward trajectory is largely tied to further currency debasement and inflation through money printing.
Well, we may not have to wait too long. As Schiff pointed out, “Europe is the best thing the US has going for it–it’s the only thing!” The problems in the EU are distracting from the problems here, a bizarre situation that we can observe through the ongoing rush to US Treasuries as the safe-haven of choice. Bill Gross, co-CEO of Pimco, believes there is a 60% chance of another round of quantitative easing. Jeff Currie, head of commodity research at Goldman Sachs, is calling for gold to hit $1,840by the end of the year.
In the meantime, companies are taking heat. Barrick Gold surprised the markets by replacing Aaron Regent as President and CEO with Jamie Sokalksy in what is likely an attempt to ease frustrations over the Company’s weak share price. Barrick did increase its dividend by 33% last month, but the market has so far not responded. This demonstrates, once again, that gold majors are still lagging the bullion price by a significant amount, while the bullion continues to sag and buyers–including central banks–continue to accumulate.