In a week in which the gold price is trading in the $1,335-per-ounce range, all eyes in the gold industry are focused on Denver.
That is the site of the annual Denver Gold Forum, the most prestigious event centered around the world’s largest gold mining companies. The event was held from Sept. 22-25 this year.
What sets this event apart from other events is the participation of nearly all the CEOs of the large gold mining firms along with major gold analysts and institutional investors.
Despite the drop in gold prices so far this year, attendance at the Forum usually falls when gold prices are down, but organizers expected the number of attendees to match or exceed last year’s. This indicates that interest in the sector is still quite high.
In fact, many value-oriented institutional investors showed up at the Denver Gold Forum for the first time looking over companies that are trading at bargain prices.
Here’s what investors need to know from the Forum about where gold prices are headed, and where the best places to invest are …
Denver Gold Forum Upbeat on Where Gold Prices Are Headed
What’s great news for gold investors is that the tone at the Forum among most in attendance was positive.
Gold fund managers and mining analysts remained optimistic about where gold prices will be trading and the future performance of gold stocks and funds.
They remained focused on both the Federal Reserve’s continuing easy monetary policies, as evidenced by no tapering at the last meeting and the deteriorating fiscal position of the United States.
“With the Fed delaying their tapering, it’s a signal that it will be difficult to break away from the liquidity that the Fed is providing,” Brian Hicks, co-manager of U.S. Global Investors Global Resources Fund, said to Kitco News. “It will be difficult for them to stop printing money.”
Thomas Winmill, president of Midas Management, told Kitco, “This environment… is going to continue to foster a negative real interest rate environment, which is typically good for hard assets.”
Many of those in attendance think that gold equities will even outperform gold if the precious metal resumes its upward path.
The reason behind this train of thought?
The efforts by nearly all of the large gold mining companies in recent months to restrain their overall spending in order to improve both cash flow and profitability.
Take Barrick Gold (NYSE: ABX), for example, the world’s biggest gold producer…
It is cutting the “fat” from the company, slashing its capital spending budget in 2013 by $2 billion.
For this year, its “all-in” cash costs to mine gold will be reduced by about $100 an ounce.
Roughly 75% of Barrick’s gold production this year will be mined at a cost of less than $800 an ounce. This compares very favorably with the industry average of between $1,200 and $1,300 per ounce.
The hope among the attendees at the Denver Gold Forum is that these actions taken by, what is in many cases a newer management team, will result in better earnings reports over the coming quarters.
Winmill of Midas Management expects gold stocks to go back to “historical levels in terms of price to cash flow, price to net asset value, price to reserves in the ground, proven and probable.”
Gold Prices Great for Streaming Companies
Perhaps the most interesting take on recent events in the gold market came from the streaming companies. These guys make upfront payments to mining companies in need of funds in exchange for a percentage of the metal produced from the mine.
The chief executive officers (CEOs) of both Silver Wheaton (NYSE: SLW) and Sandstorm Gold (NYSE MKT: SAND) told the Forum now was a great time to bolster their gold streams at a nice discount in price.
Nolan Watson – president, CEO, and chairman of Sandstorm – said to Kitco, “This is the perfect environment to try and find deals.”
Randy Smallwood, president and CEO of Silver Wheaton, added “This is a time that’s good for us; there’s a lot of opportunity on the streaming side out there.”
The opportunity is there for the streaming firms because gold mining companies are reluctant to issue new stock at the current beaten-down prices to fund capital expenditures.
While both CEOs expect some further downside for mining companies, they believe conditions are much closer to a bottom than a top.
If so, the streaming companies are an interesting way for investors to play the beaten-down gold sector.
Gold will be one of the most important investments to own in the years going forward. In fact, this group of investors is already stocking up in record amounts, so much so that the price will head toward a record high. Just check out this chart to see why gold will soar thanks to these buyers…
- Kitco News:
Gold Fund Managers, Mining Analysts Upbeat About Gold in Long Term
- Kitco News:
Mining Shares Seen Outperforming Gold in Rising Price Environment
Barrick Slashes Costs to the Bone
Time Is Right for Streaming Companies to Look for Bargains – Silver Wheaton, Sandstorm CEOs
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