With a shaky economy and an increasing number of financial experts warning us about what is just around the corner, investors are wondering what (if any) opportunities exist to help them make money in the months and years to come.
Peter Grandich – a widely respected market and economy expert who blogs at Grandich.com – shared his ideas with us. Mr. Grandich is forecasting higher gold prices in the years to come as global economic changes make gold scarcer and in higher demand.
At the recent Cambridge House Vancouver Resource Investment Conference, Mr. Grandich talked about the economy and how investors can understand what is going on in the gold supply/demand equation.
After the conference, we interviewed Mr. Grandich to get some specific ideas about how investors can take action in light of the new reality we're facing.
Mr. Grandich started our interview by restating his firm belief in gold prices and quickly summarizing why he's forecasting a rise in gold prices: "I still believe the mother of all gold bull markets remains fully intact. [In my Cambridge House talk], I discussed the fundamental reasons: Central Banks are no longer big sellers, producers are no longer forward sellers, and the creation of Exchange Traded Funds (ETFs) opened the door for institutional interest that otherwise found it cumbersome to have to secure physical bullion or use mining shares as proxies. That really tilted the supply-versus demand scenario in favor of demand. The debasement of currency and then the Fed's latest action of keeping the money spigot wide open make all systems go still for gold to continue to move higher."
Although North American investors have not participated in the gold market extensively, that could be changing in the near future, and even more-so after the upcoming election: "I think we have a 6- to 12- month window where our financial markets will be relatively okay in the US but when we get into 2013 then the trouble is going to begin," said Mr. Grandich.
So, how can investors prepare?
Investors have traditionally thought of taking possession of physical gold as being the only way to play gold but that can be difficult to do for some people, since taking possession and storing it seems cumbersome.
ETFs are one opportunity for investors to get involved in the gold market. "ETFs created a very seamless and easy vehicle for… investors to have exposure to gold and track it without the cumbersome challenge of having to buy large quantities of physical gold and store it. ETFs are extremely liquid; they track the metal price very closely."
Mr. Grandich also says that mining stocks are a way for investors to get into gold. We asked him about his feeling on whether juniors were still an attractive investment because of the increasing regulation they face. He said he believes they are still attractive: "At the end of the day, someone has to look for those deposits. Large companies still depend a lot on juniors making initial discoveries."
Then Mr. Grandich gave us some mining stock ideas but urged investors to do their own due diligence and reminded our readers that the stocks he is most familiar with and recommends are also stocks that he holds large positions in and works for as a consultant.
"An undervalued stock is Sunridge Gold Corp. (TSX-V: SGC). You just don't get a diverse amount of deposits that are either in pre-feasibility or final feasibility status and worth many more times than their current market cap."
Another stock Mr. Grandich thinks investors will find interesting is Geologix Explorations (TSX: GIX). "They are waiting on an updated resource and a pre-feasibility study. When it comes in, it should show a valuation at 3 or 4 times what the market is currently valuing them at."
"Iron ore plays are still strong," said Mr. Grandich. "The most interesting and potentially significant increase in ore is Cap-EX Ventures (TSX-V: CEV). They have the potential to be one of the biggest iron ore deposits in North America and they have a big drill program starting in the spring."
And for his fourth pick, Mr. Grandich talked about a stock he likes in an industry he's not very excited about right now: "Even though I'm not bullish overall on the rare earth metals market – I think that market has imploded and it's going to take a long time to sort itself out – one of the companies [that I'm paying attention to] is Lithium One (TSX-V: LI). I think they have the best non-producing lithium project in the world today. I think they will become an important takeover target in the rare earths metals shakeout."
"Sometimes there are no-brainers that people don't take advantage of; one of them is Oromin Explorations Ltd. (TSX: OLE)," said Mr. Grandich of this African gold company. "In early December they announced that they were in discussions as a possible takeover. There's been no news since then. They are in discussions [about possible takeovers] and we haven't heard anything, so one could assume the discussions haven't ended. The downside risk could be 20% if nothing happens but if something happens, the upside could be 100% higher."
As Mr. Grandich wrapped up our interview, he summarized some of the hot areas that investors should be watching for: "I continue to believe that we are in the mother of all gold bull markets. I think silver will follow it. After almost 2 or 3 years of being net-neutral to bearish, I've turned mildly bullish on base metals. I think they came low enough to where they brought value back again. One metal I liked a couple of months ago was zinc. Copper continues to demonstrate relative strength despite the overall weak global economy. I may have been early in getting back to uranium but I’ve learned in nearly 30 years it’s better to be a year too early than a day too late"
So even though the global market is struggling – and the long-term financial outlook seems bleak or uncertain – market experts like Mr. Grandich see some huge opportunities in several sectors. Investors should do their own due diligence and consider if some of the above investments will fit in their portfolios.
Cambridge House Vancouver Resource Investment Conference: http://cambridgehouse.com/
Peter Grandich's website: http://www.grandich.com/
Sunridge Gold Corp: http://www.sunridgegold.com/s/Home.asp
Geologix Explorations Inc: http://www.geologix.ca/s/Home.asp
Cap-Ex Ventures: http://www.cap-ex.ca/s/Home.asp
Lithium One Inc: http://www.lithium1.com/s/Home.asp
Oromin Explorations Ltd: http://www.oromin.com/s/home.asp