Special Gold Report

RONALD-PETER STöFERLE, Erste Group (07/14/2009)
"The gold sector will be one of the few industries to be reporting earnings growth and higher margins in 2009. The ratio of the price of gold to gold mining shares is currently two standard deviations outside the trend, which means that we can expect gold shares to outperform gold, not the least supported by the general tendency towards the mean value. Gold mining shares have recently displayed relative strength in relation to the gold price, but also to many other sectors. We consider this a reliable leading indicator. In comparison with their historic valuations, gold shares currently price in a gold price of USD 825/ounce, which means that they are still on extremely attractive valuation levels.

. . .More than ever, we consider the gold price in a secular upward trend, and we believe that we have only seen about half of the full swing so far—the most impulsive phase is yet to come. Commodity and precious metal cycles tend to take particularly long, at least 15 to 20 years. Given that the most recent bull market started only in 2001, we have only come through half of the cycle yet. This would make our price target of USD 2,300 at the end of the cycle appear more realistic than ever.

. . .The market is gradually rediscovering the monetary aspect of gold that has established and manifested itself over the past centuries. Gold and silver are the only accepted currencies that can neither be created nor controlled by central banks. Gold has been a symbol of value preservation, independence, and stability for centuries. This has shown yet again amid the current turbulences, and we expect this trend to hold over the coming years. The question of whether gold is becoming more expensive or the purchase power of paper currencies is becoming cheaper, is in the eye of the beholder. At any rate, gold can only fall to its inner value, which equals the production costs. Numerous examples prove its stable purchase power. One barrel of oil costs about 2 grams of gold today—as it did 50 years ago."

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