Joe Foster Discusses the Future of the Gold Bull Market

Source: Hard Assets Investor, Seeking Alpha  (12/14/07)

In a recent interview with Mike Norman, anchor of HardAssetInvestor.com, Joe Foster, Gold Strategist at Van Eck Global spoke of his outlook on gold: "We have the Fed easing at a time when we're seeing inflationary pressures in many countries around the world. So I think you can justify these high gold prices. In my mind, I think we can target higher prices going forward."

Joe Foster is the Gold Strategist at Van Eck Global. Foster brings a real-world perspective to the gold markets, traveling the globe to find out the conditions of new mining operations, the state of demand in China and the real-world aspects of the modern gold markets. He spoke recently with Mike Norman, anchor of HardAssestInvestor.com and founder of the Economic Contrarian Update, about the outlook for gold.

Mike Norman (Norman): We've seen gold prices recently move almost back to the high that we saw in 1988, at $850 an ounce. There seems to be a lot of momentum and a lot of people wanting to own gold now. What do you think is driving this move and what has pushed it so far to this level?

Joe Foster, Gold Strategist, Van Eck Global (Foster): We've been in a bull market since 2001. Gold started down around $250/ounce at that time, and it has more than tripled since then. The big driver has been the falling U.S. dollar. Investors are losing faith in the U.S. currency, and that's been causing them to move to gold. More recently, the credit turmoil, high oil prices and the whiff of inflation have been additional factors causing people to invest in gold.

...Norman: I personally got involved in gold in 2001 and 2002, when gold was trading at $250-$260/ounce. It seemed like a no-brainer to me at that time. Gold was trading far below the cost of production. Do you get a feeling at all that now there is somewhat of a speculative aspect to the market? Has the gold market gotten ahead of itself?

Foster: It goes in short-term cycles. It does get overbought and it has been overbought in various periods in this cycle. But when you look at what's driving it, what's going on in the credit markets right now is unprecedented. We have the Fed easing at a time when we're seeing inflationary pressures in many countries around the world. So I think you can justify these high gold prices. In my mind, I think we can target higher prices going forward.

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