Market commentator and investor Peter Grandich of
Grandich.com and Grandich Publications tells
The Gold Report
that certain plays on surging demand and looming commodity
shortages are no-brainers for investors, and he shares a few
ideas on how to profit from these conditions. Peter also believes
that U.S. monetary policy has been a disaster and that it will
"end badly" for the U.S. stock market and economy. He's bullish
on China and on base-and especially-precious metals, energy, food
and water. Gold and silver are still his big plays.
The Gold Report:
With the turmoil going on in Egypt, were you surprised that gold
didn't spike up a bit? One might look at this situation and
conclude that gold is fully valued for the intermediate term and
that perhaps investors should be looking elsewhere.
I believe that gold was correcting, and as I noted on Friday,
January 28, I think the bottom was put in from where it had
basically doubled between the end of 2008 and the end of 2010. I
had written about the $1,310/oz. area where I felt it would
bottom, and it did so in that range on January 28. I believe it
was the bottom, and I believe it is more fortified today than it
I think what we've seen is a corrective phase, which has
happened periodically over the last decade in gold. We have seen
a tremendous amount of bearishness come into the market, which is
always healthy for those who remain bullish as I do, and I think
now we're going to see a resumption of the trend up. I don't
think the issues that are currently underway in the Middle East
have brought any big concerns to any of the markets. The stock
markets are still up, and the dollar has remained relatively
flat. So, I don't think that the impact on gold from what is
happening in the Middle East as we speak, is any more
questionable than why isn't the stock market going down.
Do you have an intermediate term target price or forecast for
Yes, in 2009 I forecasted $1,300 for 2010 and +$1,500 in 2011,
and I've stated repeatedly for years that what I've called the
"mother of all bull markets" won't end, in my opinion, until
there's a two in front of it (i.e., +$2,000/oz.). So, my
long-term target remains +$2,000.
Where is the support on gold?
The key support was $1,310, which it held, and major support
would be the 200-day moving average, which is around $1,275 now,
but that's going to inch up in the coming days. It has clearly
held, and while I don't think we're going straight back up, I do
think once again this mother of all bull markets has eaten up and
spat out all the gold-top callers, the bubbles and the people who
are looking for major corrections and who thought they could sell
out and somehow get back in much lower.
If gold were to actually reach the $2,000 level, what effect
would that have on earnings of gold equities?
One thing that's been most positive here in 2011 that we have not
seen in the last couple years is the relative strength in the
mining shares-even down so far as the junior level. Despite the
correction of $100 or so on gold, we did not see a substantial
correction in the mining shares. This was just another shallow
and short-term correction.
In fact, in recent days while gold remained flat, we saw
strength in the mining shares. So to answer your question, I
think that if those of us who are forecasting a much higher price
for gold are right, then we should see a corresponding better
percentage gain for the majors. I would feel confident that if we
saw a $2,000 gold price, most of the major producers would likely
have at least doubled in price, if not more. Now, I think one of
the mistakes continuously made is that people think it always
trickles down to the juniors. That's not necessarily the case.
Juniors are valued more on an individual basis according to the
projects they are trying to develop.
On January 26, you said that you were thinking about going short
in the U.S. stock market and looking for that precious metals
bottom. How does that look now?
The U.S. stock market has been up on what I call financial
heroin. The QE1 and QE2 [quantitative easing 1 and 2] and what
the Fed has been doing in the market has really gone way past
steroids and is really setting the U.S. stock market up for an
eventual fall back to earth. So, I am looking to time that short
position, but that has not been implemented yet. It's certainly
getting to the point now where going short in the U.S. stock
market could be advantageous. In terms of the precious metals
market, I believe the next leg up may not be straight up, but
will be healthier and work its way up.
Where should investors be looking now? What countries? What
I think people have to realize that the United States is no
longer the economic engine that pulls the whole world around, and
therefore one could be neutral to bearish, as I am on it and
should look to other areas of the world that can grow. Clearly,
China continues to be one of those areas. Brazil, Germany and
other parts of Europe and even Canada offer more economic
potential than the U.S. does. I think there are clear no-brainer
industry plays which should continue to see large-scale interest
over time. Three of them are based on things that we're running
out of: One is water, two is food and three is general
Chinese fiscal and monetary policy has worked quite well for
China, but it's been very tough on the United States, especially
in the last decade.
I borrow a line from the very well-known hedge fund manager
, who said the best advice he could give regarding China and
America is to make sure your children and grandchildren learn to
speak Chinese. It's only a question of time as to when China
replaces the United States as the world's largest economic power,
and I would hope at that time that we also turn over to them the
responsibility of being the world's policeman.
Nevertheless, China, whether they got there by hook or by
crook, is certainly in a much more enviable position than the
United States as an economic power and is becoming very close to
being on the same scale as a military power. In the next 5 or 10
years the better of the two markets would without question be
China over the United States.
How do you play China?
You can play it through ETFs that invest in Chinese stocks, and
there are now some limited ways to play the currency. But I think
one of the ways you play is to not be aggressively long U.S.
I have heard Jimmy Rogers say in the past that one reason people
have had an aversion to Asian markets, and I guess you could say
especially China, is that you might not be able to trust the
There is no question about that, but after what has happened in
the United States, could you trust Wall Street any more than
Chinese companies at this point? I mean if anybody is deserving
of not being trusted after what's happened in the last few years,
it's certainly Wall Street. Just think about it-two years ago we
were told that if we didn't bail them out, the whole world was
going to collapse, and now they're making record profits and
giving away record salaries and bonuses. Something is wrong
there. I believe America has been taken, and it was taken by Wall
Why do you like iron?
We like iron because outside of the United States we continue to
see strong growth in Asia and particularly China. Iron ore is
obviously a real necessity for that.
Your favorite play in iron ore?
It would be a client of mine and one that I own a lot of stock in
Alderon Resource Corp. (TSX.V:ADV; OTCQX:ALDFF)
. I have called it "son of
Consolidated Thompson Iron Mines Ltd. (
" (CLM recently received a takeover bid.) Many of the management
team that made Consolidated Thompson into what it is left and
built Alderon with its Kami Iron Ore Project in Newfoundland and
Labrador, Canada. I think the company is a prime takeover
Probably some other people think that, too, because I note over
the past six months the stock is up 185%. What will be the next
catalyst to move this stock? Takeover attempt?
I think the next catalyst will be that the drill results from the
winter program will prove up even more tonnage and then because
of continuing consolidation in that area of the world, they would
likely become a takeover candidate.
You like lithium as well.
Yes, lithium seems to have real legs, and there's a move towards
it. It's still speculative, but within that frame are two
companies that are clients of mine-
Lithium One Inc. (TSX.V:LI)
Rodinia Lithium Inc. (TSX.V:RM; OTCQX:RDNAF)
. They seem to have advanced-stage exploration projects that the
market believes could become producers, and they are not
overvalued as some other rare earth metals stocks have
The driver here is batteries for cars. Is the electric car really
the wave of the future?
I don't know if it's the wave of the future, but there's no
question that the next generation is not going to be able to
depend on fossil fuels as we have because it's going to become
quite expensive. It's my belief that $100/barrel oil will in the
next decade become the bottom price for oil, which will translate
into gas prices that will seriously impact most Americans. So,
some sort of alternative way-with electrical power being
one-where the cost to travel miles can go down versus up with gas
is something that a lot of Americans are going to have to look
Even though there are limitations to the battery-powered car?
Yes, I just think that the days where we can just buy gas and
drive across America is going to change for many.
One metal that doesn't get a lot of comment is cobalt.
Formation Metals Inc. (
is a client of mine and the only pure cobalt play in North
America. Cobalt is becoming a very strategic metal used in a lot
of different areas, and as people realize that this company is
one of the only pure plays on cobalt in North America, I think
it's going to become more attractive.
Gold is still your favorite metal.
I'm still overweight in precious metals-gold and silver versus
base metals. You know, when you call something the mother of all
bull markets, which I believe gold and silver are in, I still
believe you overweight yourself. Base metal companies are still
worthy, but you want to be more weighted to the gold and silver
How do you play gold and silver right now?
I think most people should have physical gold and silver. If
they're not very large dollar investors or very diversified, gold
and silver ETFs is the way. Then, the second way of course is
ETFs that diversify themselves through mining shares, and the
speculative way to play gold and silver is the junior resource
Okay, and do you have some of those you can talk about?
Crocodile Gold Corp. (TSX:CRK; OTCQX:CROCF)
is an emerging producer in Australia and may still have some
impact from the unusually bad weather, but I think as 2011 goes
on, we will see better production out of it.
The wet season has caused the company to underperform its
forecast, but given how wet it has been, are you satisfied with
With 20/20 hindsight, I think Crocodile, if it had to do it over,
would have stuck to its original production forecast versus the
increase it had suggested. It created a sense of disappointment
that didn't really have to be there. The share price does not
reflect that yet.
Another gold play?
Timmins Gold Corp. (TSX.V:TMM)
is a very undervalued situation with my prejudice noted. It's
been involved in a potential takeover, and I think that has
prevented people from rerating its value based on some of the
great drill results, expansion of production and potential new
You mentioned a potential takeover?
Timmins is trying to make an acquisition, which it still may;
however, it wouldn't even surprise me that Timmins becomes a
target of a larger producer, particularly one in Mexico, because
it has just so greatly advanced its current production mines and
has demonstrated large-scale exploration skill potential on
Also, I do think the Yukon gold rush is going to be even
bigger and better this year.
Kaminak Gold Corporation (TSX.V:KAM)
is not a client, but they're certainly going to be a leading play
there. I think an undervalued play also up in the Yukon is a
client of mine that I own a large position in called
Silver Quest Resources Ltd. (TSX.V:SQI)
. The reason why I think that the stock is attractive is not only
does the company have a large land package in the Yukon, but it
also has two advance stage projects in British Columbia, one of
which looks like it can have over 1 million ounces (Moz.) of gold
and the other almost 2 Moz. of gold equivalent, which clearly
support the current market cap and kind of gives you the whole
Yukon play for nothing.
One other gold play is
Oromin Explorations Ltd. (TSX:OLE; OTCBB:OLEPF)
, with continuously great drill results out of West Africa. The
company just announced yet another discovery. I think the stock
is very cheap.
I think copper has been in a stealth bull market despite
record prices. It's still not grabbing the attention of the
general markets or even within the resource market-everybody
keeps looking for it to go down. Now $3.80-$4/lb. is starting to
look like the new bottom for copper with the potential to get to
$5 on the upside. So, I think copper is very attractive, and
there are two companies I like-both clients of mine-
Curis Resources Ltd. (TSX.V:CUV; OTCPK:PCCRF)
Excelsior Mining Corp. (TSX.V:MIN)
. These companies are both developing in situ mining operations
just like uranium. Curis is clearly well advanced over Excelsior
in terms of the potential to become a producer, but both are
clearly undervalued given the price of copper and how much upside
both companies seem to have.
Probably the most undervalued exploration company of all my
Sunridge Gold (TSX.V:SGC)
. I call it the son of Bisha. The Bisha Mine is the huge project
Nevsun Resources Ltd. (TSX:NSU; NYSE.A:NSU)
has that is pouring its first gold out of the State of Eritrea in
Africa. Sunridge has been recently announcing results that I call
Mama Mia results because they are showing phenomenally high grade
copper over large widths. The company just put out another set of
results, and, quite frankly, if the resource market hadn't been
down of late, and if these drill results were in Quebec instead
of Eritrea, the stock would have doubled. These drill results
just can't be passed up by anybody interested in this market.
You like uranium, right?
My tracking list is seriously overweighted to uranium. I don't
think that the companies are cheap any more as a group, but
they're certainly not close to overvaluation, and on a select
basis I think people can still be purchasing uranium plays.
Obviously the single best way to play uranium [as a commodity] is
through a company on our list called
Uranium Participation Corp. (TSX:U)
, which is really just a holding company that owns actual
uranium. If uranium prices go up, Uranium Participation should go
up. The second way would be with the significant players in that
industry. There's no question that the blue chip in that industry
Cameco Corp. (TSX:CCO; NYSE:CCJ)
, and then I think some other plays, particularly
Denison Mines Corp. (TSX:DML; NYSE.A:DNN)
, are attractive. On the exploration end, one is a client of
Crosshair Exploration & Mining (TSX:CXX)
, and then there's a company that used to be a client and with a
lot of growth potential and that is
Strathmore Minerals Corp. (TSX:STM;
Thank you for your time.
Peter Grandich is the founder of Grandich.com and Grandich
Publications and is editor of
, which was first published in 1984. He blogs and comments
daily on the world's economies and financial markets and posts
his views on social and political topics. He also blogs about a
variety of timely subjects of general interest and interweaves
his unique brand of humor and every-man "Grandichism"
expressions with his experience gained from more than 25 years
in and around Wall Street. The result is an insightful and
intuitive look at business, finances and the world, set in a
vernacular that just about anyone can understand. In his first
year, Grandich's wildly popular blog had more than one million
views. Grandich also provides a variety of services to publicly
held corporations on a compensation basis.
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1) George Mack of
The Gold Report
conducted this interview. He personally and/or his family own the
following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are
The Energy Report
The Gold Report:
Alderon, Rodinia Lithium, Crocodile Gold, Timmins and Strathmore.
3) Peter Grandich: I personally and/or my family own shares of
the following companies mentioned in this interview: Alderon
Resources, Silver Quest, Excelsior and Crosshair Exploration. I
personally and/or my family are paid by the following companies:
Alderon, Rodinia, Lithium One, Formation Metals, Crocodile Gold,
Timmins, Silver Quest, Oromin, Curis, Excelsior, Sunridge and
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