Gold Price Will Hit $3,000, But It's Going to Be a Wild Ride
Commodities / Gold & Silver 2020 Apr 30, 2020 - 07:25 PM GMTBy: The_Gold_Report
Agora Financial's Byron King and John-Mark Staude of Riverside Resources offer their viewpoints on markets during the COVID-19 pandemic in this conversation with Maurice Jackson of Proven and Probable.
Maurice Jackson: Today, we will seek to discover the true price of gold and silver and prospect generators. Joining us for a conversation is Byron King of Agora Financial, along with Dr. John-Mark Staude of Riverside Resources Inc. (RRI:TSX.V; RVSDF:OTCQB). Gentlemen, I hope you both doing well.
Mr. King, I'd like to begin with you, sir. Bloomberg issued a press release recently that Bank of America expects gold to reach $3,000/ounce, which is a 50% increase from its record. In your opinion, is this a realistic number, or was Bank of America being far too generous or conservative?
Byron King: I think Bank of America is on track. I don't think there's any question gold will see $3,000. As with all things in life, it's just a question of how long it will take.
But when you say that gold will be $3,000, that means that the U.S. dollar will be dropping in value relative to gold by quite a bit, about 50% from almost where it is now. So if it's at $1,700 now, it has to move that extra $1,300 up to get to $3,000, which implies a decrease in value of the dollar relative to gold, because gold is the inverse of the value of the dollar.
Maurice Jackson: John-Mark, what are your thoughts regarding Bank of America's gold price expectations?
John-Mark Staude: I agree with Byron. It's always about time, but I've never seen so much creation of new money. COVID-19 has given an opportunity to pop bubbles that maybe already existed.
And now, I'm getting checks in the mail as a U.S. person for just breathing, and it's pretty amazing. If I get free money, I don't get free gold. So I see gold is a hard real asset that I think is worth a lot more money, and also it is very difficult to get it out of the ground and find it. So I think companies that have it or companies that can develop it are of great value.
Maurice Jackson: That's a great perspective. They're not getting free gold. I like that one. Byron, can you provide us with some insight as to what is going on in the precious metal space as a whole?
Byron King: In the precious metal space as a whole, plenty is going on. Demand is going up because you can view gold really as a barometer of people's trust in government. And so when people distrust government, when they distrust the fundamental currency of their government, gold tends to go up.
In the gold space globally, in pretty much every currency of the world, gold has already set records. It's setting record prices in euros, in Russian rubles, in Chinese yuan, British pounds, Japanese yen. The only currency that it hasn't really broken through previous highs, and [set] a new record, is the U.S. dollar. And that has to do with the dollar's role as the world's reserve currency.
A lot of people across the world owe immense levels of debt, and the only way to pay that debt is to denominate it in dollars. They need to get dollars. So they're selling stuff to move to dollars, so they can pay their debt. That's one aspect of it. That's the monetary aspect of it.
On the practical side of things, there's immense demand for everything, from little one-ounce coins and what have you, that are practically sold out. The U.S. mint is charging $400, $500 premiums over spot for gold coins, all the way up to the big bullion bars that people traded internationally. Those have all sorts of shortage issues over the breakdown in global commerce. The fact that there's very little airline trafficking to move gold from London to New York or from New York to Switzerland, or wherever, people are chartering airplanes, just to put a bunch of gold bars on the airplanes instead of people.
And then another angle you have to look at is that across the world, many, many mines—gold mines specifically, but gold-silver, gold-silver-copper, copper-lead-zinc that has a gold offtake from it—those mines have throttled back. I think something like 30% of the world's copper mining right now is either shut in completely or dramatically scaled back. And that is also reflected in gold mining, just because of mines that have issues with the virus problem, sick workers or they can't get the fuel or the explosives or the chemicals, whatever they need, from the port up to the mine, just because of the roads are closed. You can't travel.
Maurice Jackson: I think a lot of people are not considering the supply-chain constraints, when you're discussing what's going on in the space. And Mr. King, you've seen the up and down in the markets in the past. Is this one different in terms of the government devaluing the currency?
Byron King: I hate to say this time it's different, but yeah, this time it is different. I've been around for a while, according to my driver's license, and I've seen governments do really stupid things, monetarily, politically, economically, militarily, over the years. I've seen some really stupid things happen.
But right now, they've just basically opened the valves on the dam of stupid monetary and economic ideas. And it's all being done out of true desperation. When we say, "Oh, the government's sending checks out to everybody," yeah, and they should, because we have 26 million people in the United States who are freshly unemployed, and we have to do something. The only idea that they can implement quickly is to send everybody a check and the heck with the monetary aspects.
I hope at some point things start to clear up and clarify and we can resolve and start to fix what's broken. But man, oh man, this is a stupidity squared in terms of what governments ought to do versus what they are doing.
Maurice Jackson: We've discussed the price of bullion. What is your outlook on mineral exploration with an increase in gold and silver prices? And how do you see the summer and the latter part of 2020 going?
Byron King: Oh man, that's about four or five questions here. How do I see the summer? First of all, in the company space, I see a lot of great companies, ranging from really big guys—the BHPs of the world and the Rio Tintos—all the way down to small juniors, such as Riverside and many others; a lot of these companies from the small to the big, were smart enough and nimble enough to capitalize up in the last six or eight months in the lead-up to before the current calamity. So a lot of these companies have some money. But not just money, they've got people with ideas. And so, they have a drilling program, they have an exploration program, they have development programs.
So the companies that are well positioned to move forward will move forward to the extent that they can. It's very much dependent on the jurisdiction. In Canada, for example, if you go to the Yukon, which is a very large mineral exploration area, it's a 14-day quarantine. You don't just fly up to Whitehorse, go visit a site, jump on the plane the next day or two and come back in. No, no, no. You go to Whitehorse, you're going to spend 14 days in a hotel with them sliding pizzas under the door for you before you get to go to work.
And other places in the world have similar aspects. The thing is that once you're there, once you're on the ground, and you've got your teams and your crews, and if you can keep the bug out of your mining camp, you can explore, you can drill, you can map, you can do geophysics, you can do a lot of things.
You've got issues in terms of moving. Let's say you drill some core, you crush it, you bag it and you send it to the lab. You've got just logistical issues in sending it to the lab, and the lab [in] turning it around. Maybe the lab is slow.
But I think there are a lot of exploration things that are happening and going to happen in the near term. In terms of who's doing well: If you have an operating project, and you have the virus issues under control, you are making money hand over fist, and if you're not, there's something wrong.
If you have an operating gold mine that can either pour out the gold ore bars or come up with a concentrate or something, there's a market for that as long as you can, again, logistically get it from where you are to where it needs to be. And that, again, has issues that have to do with aircraft availability, truck and driver availability. Oil is cheap, fuel is cheap—if you can get it. If you're in the wrong place and they can't deliver the fuel from the terminal to the gas station and the fueling station, that makes a problem.
But that's maybe a more detailed answer than you're looking for that. That's how I'm looking at the gold space. I have a very positive view of it, for the right companies with money and good management teams. And again, working in the right spots.
Maurice Jackson: John-Mark, Riverside Resources exemplifies many of the virtues that Mr. King just alluded to. How has Riverside prepared for the situation?
John-Mark Staude: We were lucky. We were already working virtually in terms of teams working offsite, and not a big office setting. Secondly, we have guys on the ground.
What Byron is saying is correct, that you have the 14-day quarantines. Well, we already have the team in place. In fact, right now some of those guys are still able to work in their local communities, and where they live and work is the project sites.
And a third thing is that we have big partners. Having a partner like BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK), as Byron said. . .[we are] in the field doing field work and doing programs and we're delighted. We have regular meetings with them, all virtually, and we're able to help the guys on the ground to do the programs.
Maurice Jackson: Byron, with a rising gold price, are more generalist investors basically taking notice and flowing into the mining space? And if yes, where is a good starting point for them to consider when looking for good value propositions and exploration?
Byron King: Well, the answer is yes. A lot of people were very badly burned with their traditional market investments up until late February, early March. And then, by mid-March, when the big crashes came, a lot of people watched their IRAs and their 401Ks just absolutely fall off of a cliff. And some people did the wrong thing; they sold at the bottom, just out of panic. There's been some recovery, but a very significant recovery has happened in the gold and the gold-mining space.
If you're new to the business, unless you really are a fast study, you want to be careful about getting into the junior mining space, if you don't know what you're doing. And I say that, with my dear friend John-Mark Staude here, who runs the junior mining company.
I don't want to put words in your mouth, John-Mark, but I think you'd agree with me. If an investor out there doesn't understand what this is all about, be very, very careful. It doesn't mean don't go into gold. Physical gold, if you don't have some, get some. We're just talking about $3,000 gold and it's at $1,700. So in the sense that you can go to certain physical dealers and buy a coin or buy a small ingot, start to build your stash. That's probably not a bad idea to preserve some wealth.
In terms of other things, there are mutual funds that focus on the gold mining space, some better than others. But a lot of those gold-mining-focused mutual funds have done very, very well. There's one—I'll just give you a symbol, it's OGMIX—it's up 50% since March 18. It had a nasty crash to get there, but it's recovered nicely.
There are many others though, some of the ETFs [exchange-traded funds] are pretty good. Anything with the name Sprott in front of it—the Sprott gold miners, Sprott junior gold miners—[are] probably good way to get in there. There are the big miners—Barrick Gold Corp. (ABX:TSX; GOLD:NYSE), Newmont Goldcorp Corp. (NEM:NYSE), those big names, if you want to pick stocks—[are] companies that are probably going to do very, very well in the next few months, especially in rising gold prices. Or some of the royalty companies, and they range in size from really, really big guys, like Franco-Nevada Corp. (FNV:TSX; FNV:NYSE), to smaller guys, very well run, like Metalla Royalty & Streaming Ltd. (MTA:TSX.V; EXCFF:OTCQB), but [they are] terrific royalty companies.
Then you start to get into the intermediates, and then you get into the juniors. And if you're not familiar with that space, that's a very dangerous space to walk into because while there's really a lot of upside on some of these risky plays, there's a whole lot of downside too. When one says: "Oh look, it's a $0.10 stock, how low can it go?" It can go to zero. It can go to $0.01. But at the same time, some of those $0.10 cent stocks are going to be $5 stocks too.
Maurice Jackson: Byron, you and I visited John-Mark in Mexico and reviewed some of Riverside's property bank, and I'd like to find out from you, what do you recall from that experience?
Byron King: Oh, several things. First of all, visiting Mexico with John-Mark is worth the trip, just to spend time with John-Mark. I say this while he's sitting here; I'm going to embarrass him. But he's just a wealth of knowledge. He's been studying Mexico. He's been studying the Western U.S. for years and years and years. He doesn't look nearly old enough to have done this, but it's true. He did. So first of all, if you go on a field trip with John-Mark, you come back with a master's degree in John-Markdom. And you are geologically much smarter than you used to be. That's one of the things I remember.
Other things I remember—and we were talking about this before Riverside made their deal with BHP to become the exploration partner in Mexico for BHP—John-Mark has this list of things, of names of places that are all worthwhile exploration opportunities or development opportunities.
I remember one particular one, just south of the U.S. border with Arizona. I'm in love with Cecilia, a beautiful place, gorgeous geologically situated. Other places, we were driving along this one area, going to this one exploration site. . .I'll let John Mark tell the whole story. When you look out the window of the truck, as you're driving along and bouncing around on this gravel road, the gravel is green, and you look down and you say, gee, why is the gravel green? He says, "Well, it's because it's made out of malachite, but not pure malachite. You're driving over perfectly good ore to get to the exploration zone." So right away I'm thinking, oh man, there's something here.
So those are some of the things that I remember, it's just John-Mark personally, John-Mark, professionally, some of these fabulous locales that he's been able to stake out and claim for the company over the years. And now he's partnered up with BHP, which has nice deep pockets to write big checks for good projects, of which there are many.
Maurice Jackson: John-Mark, what is the advantage that prospect generators, and in particular, Riverside Resources, have in the current climate of mineral exploration, and especially as it relates to COVID-19?
John-Mark Staude: Well, I think first thing is the prospect generators have a portfolio, so it's not betting on one project. So, as COVID-19 and these other things were causing problems, they're not necessarily homogeneous everywhere. And so, there's opportunities.
I think the second thing for the prospect generator is, they're usually partnered. As we've mentioned, we're partnered with other companies, so we're not going off their balance sheet.
The third thing is, they have quality projects, or projects that other people are funding and working on, so they must have something of interest to allow those people to wish them good. And so, they've done their due diligence.
But for us, we've been project generators working with Antofagasta Plc (ANTO:LSE), Cliffs Natural Resources Inc. (CLF:NYSE), Kinross Gold Corp. (K:TSX; KGC:NYSE), Hothschild, and now with BHP. So we have good projects and I think the opportunity is that, build a group that has good projects in this market, you have a really good chance for success.
Maurice Jackson: John-Mark, what are a couple of the key mineral exploration objectives Riverside is progressing during the COVID-19 social distancing?
John-Mark Staude: I think one of the key things is our spin out of Capitan Mining, which is going well. We actually had the AGM [annual general meeting], and now we've had the approval through the BC [British Columbia] courts. Now we're working for the TSX listing and the financing. But gold price going up is really great, because that's what Capitan is. It's an open-pit gold project that Riverside owns. So that's one of the big things we've been doing.
The other thing is working with BHP. On that, we've been able to move ahead with programs.
And the third is we're working on some new deals. I think people at home has been great. You're able to call them and do lots of business. Usually, it's hard to catch people. They're on planes or running around the meetings. We are able to have lots of meetings and go over data. Now, we're able to do a number of term sheets. So we look forward to having more deals announced in the coming month.
Maurice Jackson: All right. In closing, Mr. King, what keeps you up at night that we don't know about?
Byron King: Well, there's a lot of doubt about where the economy is going. The virus is a medical issue. It's an epidemiological issue. If you've paid the slightest bit of attention to it, you've probably gotten a lot smarter about biology and medicine and epidemiology than you were a month ago. I want to say that matter will resolve. I mean this is a bug. It is a virus. It's not the world-killing plague that's going to wipe out humanity or anything.
But it has accelerated a lot of trends that were sort of in motion that may have occurred, but now they're all jamming us right in the face—everything you can think of, from the idea that your local school is now online, colleges are online, the kids are home from school. It completely changed education. We've completely changed the idea that millions, tens of millions of people are working from home. That's going to change the real estate business.
The idea that so much change is happening so quickly—there are so many unknowns and just pieces of fallout that are going to occur. And so, I think about where is all this going. Now, considering what I do with much of my time—which is I spend my time doing geology, worrying about the minerals and mining business—I'm thinking about what does this mean in terms of mines and minerals? Does the world still need copper, gold, silver, lead, zinc, rare earth minerals, all these sort of things? Well, the answer is yes, it does.
And so the question is, how will the area that I am knowledgeable about. . .adapt? In terms of thinking about the future, I think these mining companies—companies like Riverside, people like John-Mark, there are other companies out there—I want these companies to be successful. I want these gentlemen to succeed, and these gentleladies. There's some women in the business too. I want these people to succeed. I want them to do well.
And the question is that, in the economy that has evolved, with millions of unemployed and the government just spending money like it's the Niagara Falls of dollar bills or something—what is all that going to do to the whole financial and economic underpinnings of what. . .what we do out there in the field, which is real science, real geology? This has to work, because a lot of the trends that were coming before—not enough copper, not enough rare earth, not enough battery metals, technology metals—all those things are going to be there on the other side of this virus issue.
So in terms of myself, in terms of what I think about and worry about, I worry about that a lot. I do stay up late or wake up in the middle of the night, thinking about what's the next idea here.
Maurice Jackson: John-Mark, what keeps you up at night that we don't know about?
John-Mark Staude: What keeps me up at night is people are forgetting that we actually need to mine, and it's a vital thing. I'm disappointed at certain jurisdictions for not allowing the mining to go forward because it is vital. And I think that's something that we can do to produce resources for the planet that'll make the planet stronger. And we definitely all need those to grow the economic rebound that we're up for.
Maurice Jackson: Last question, Dr. Staude, what did I forget to ask?
John-Mark Staude: Oh, you've asked a lot. This is great. But I think one thing is, from Riverside's standpoint is, we really look forward to talking to current and prospective shareholders. We invite you to visit our website, www.rivres.com.
Maurice Jackson: Mr. King, what did I forget to ask?
Byron King: Well, you know, [in a] very mercenary sort of way, you forgot to ask me what newsletter I write. And the answer to that is, I write a newsletter called Whiskey and Gunpowder. I work with a group called Agora Financial. And so you want to go to www.agorafinancial.com. It's actually a free e-letter, so it doesn't even cost you anything.
And then, on a more serious note, the one thing that we did not discuss—you've got to keep an eye on the energy industry. Right now, there is a price war going on. Saudi Arabia has decided to flood the world with oil, where 200 million barrels [are] just floating around on tankers out there. Not long ago, we saw the price of oil go negative for West Texas Intermediate. The U.S. and Canadian energy industries are being completely, totally, utterly wrecked by this price war. And the longer it lasts, the more the carnage.
And what you want to be really careful about, and worry about to some extent, is what the global energy industry [is] going to look like on the other side of this current economic situation. Are we all going to go back to the good old days of relying on the Middle East for our oil?
And then, the other angle to this is the petrodollar—the U.S. dollar as the world's reserve currency—is under extreme threat with the breakdown of international oil markets. Breaking down international oil is another way of breaking down the petrodollar. And when the petrodollar fails as a monetary instrument in the world—notice I said when it fails because I'm not sure how you can fix it from here—we are in for a really wild ride.
If you think this wild ride is wild, the next wild ride can be worse, and that is why, to bring it all back, that's why you need to have some gold. The gold is what is going to preserve your wealth through whatever rough seas lie ahead. And I'm pretty sure that there are some rough seas, and I'm pretty sure that they're coming our way.
Maurice Jackson: And speaking of gold, before you make your next bullion purchase, contact me at (855) 505-1900 or email maurice@milesfranklin.com. I'm a licensed representative for Miles Franklin Precious Metals Investments, where we provide a number of options to expand your precious metals portfolio from physical delivery to offshore depositories and precious metal IRAs. Finally, we invite you to subscribe to www.ProvenandProbable.com, where we provide mining insights and bullion sales.
Gentlemen, I'd like to thank you both for your time, and I look forward to speaking with you in the near future.
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
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