Disneyworld for Goldbugs

Monday, June 18, 2007

I spent all day at this year's Gold, PGM & Diamond Conference in Vancouver. Some 300 exhibitors, predominantly junior explorers, developers and miners, created a kind of Disneyworld for goldbugs. As my portfolio allocation for gold stocks is exhausted I focused on silver companies. The global liquidity glut does not stop at their doors. All companies I talked to reported a trouble-free environment for raising more capital as investors have begun to take note of the secular bull market in precious metals.
Taking it from my experiences in the past I see the biggest potential with juniors that are in the stage of transforming from developer to miner and have secured financing. Combine that with a well-experienced management that holds a substantial share and some upcoming analyst coverage in the pipeline and you may have a stock I want to buy.
With a market cap of only roughly $150 billion the precious metals industry has a long way to go.
What is a bit irritating, though, is the absence of physical gold buyers. A small random sample of 10 visitors did not produce any bullion gold holders. When I asked at what level they would buy, answers centered around another retreat to $500/oz. I am confident these goldbugs will jump on the train once gold breaks above its all-time high at $850 as all fundamentals promote higher prices.
Silver miners did not disagree that the white metal could fetch closer to $50 an ounce than the current paltry $13.20 in the mid-term.
I will follow up with some notes on the companies that attracted my attention.


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