EDITOR'S NOTE: Catch the all new Kitco.com Market Data and Bitcoin sections!

Look for Gold To Consolidate In Coming Months: Pierre Lassonde

By Kitco News
Monday February 24, 2014 11:38 AM

(Kitco News) - After gold’s strong price move at the start of the year, Pierre Lassonde, chairman of Franco-Nevada Corp. (FNV), looks for the yellow metal to consolidate maybe $50 on each side of $1,350 an ounce in the coming months.

Lassonde was the keynote speaker at Gold Stock Analyst Investor Day over the weekend in Fort Lauderdale, Fla., put on by widely followed gold stock analyst John Doody.

In a wide-ranging interview with Kitco News’ Daniela Cambone, Lassonde described himself as bullish on gold but is looking for a period of consolidation. If prices move up too fast, demand would start to evaporate, he explained.

“So I would think the gold price is more likely to consolidate in the $1,350 (region) – plus or minus $50 – for this year,” Lassonde said.

Although some believe that Germany’s plan to repatriate its gold could impact the market, to set the record straight, Lassonde said central bankers probably wonder what all the fuss is about and spend “no time” thinking about gold.

Another factor that he doesn’t see impacting the market is the hoped-for removal of gold-import restrictions in India. He added that the precious metal is already making its way into the country via smuggling.

Lassonde said movement out of positions in exchange-traded funds and the Comex market played a big role in gold’s sharp slide during 2013.

“Between the two of them, essentially 1,700 tons of gold came out in 2013 vis-à-vis the year before,” Lassonde said. “The gold-price sensitivity is $30 per 100 tons….That is why we saw the gold price come down so much.”

One factor that could hurt gold would be if China were to go into a recession, Lassonde said. As it stands, investment into gold has shifted from Western to Eastern nations.

“So if something was to happen in China, like a recession, it would definitely hurt the gold price,” he said.

Lassonde looks for global gold-mine production to be essentially flat over the next half decade. Output rose during the last five years in response to higher prices, he said.

“But we haven’t seen really high-grade discoveries,” Lassonde said. Mining executives are now more focused on returning value to shareholders, aiming to cut costs and maximize earnings. “Because of that, you’re going to see production essentially flatten out for the next five years.”

When the gold bull market first started back in around 2002, the best-performing assets were the intermediate and then the senior producers, Lassonde said. “The juniors joined the party much later,” he said. He sees a similar trend developing again.

“If you ask me now, I think we’ve turned the corner. I think the best-performing stocks…in the gold space are going to be the intermediate companies that are producing and that have grown, and then the senior companies which are flat on production but they have real production and they are going to make real money.

“And the third one, I think, will be the juniors, because it’s been so hard to find really great assets and the public has been burned so badly that I think they’re going to tip-toe back into them.”

He figures there are still major deposits that have not yet been discovered due to the lack of technology. The mining industry has not spent as aggressively on research and development as say the oil industry, he added.

Related Stories:

Market watchers are watching to see whether India, one of the world’s largest consumers, eases restrictions on gold imports meant to combat a wide current-account deficit. Even if the rules are lifted, Lassonde said he would expect “very little” impact on prices. He commented that there is a history of smuggling gold into the country, and smuggling routes likely were re-established once the onerous import rules went into effect.

“When they lift (the restrictions), what difference will it make?” he asked rhetorically. “Five dollars maybe. But I don’t think you should count on it to lift the gold price anywhere.”

Lassonde commented that he would not read too much into any news reports that it may take a period of years for Germany to repatriate its official-sector gold reserves.

The country’s central bank is “very, very touchy on appearances” and doesn’t want to ruffle feathers, Lassonde said. “They certainly don’t want to appear like they are impatient to get their gold back for any reason,” he said. In fact, he added, the central bankers probably wonder why there is a fuss.

“Having had the honor of meeting a number of them (central bankers), I can tell you they spend no time whatsoever thinking about gold,” Lassonde said. “We think that they do. But they don’t.”

By Daniela Cambone of Kitco News; dcambone@kitco.com
Follow Daniela Cambone on Twitter @DanielaCambone

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
kitco news

Precious Metal Charts

Click to see this Precious Metal chart
  1. 24h
  2. 30D
  3. 60D
  4. 6M
  5. 1Y
 

Interactive Chart