Peak Gold Theory Gains Impressive Adherents
Source: Mineweb, Dorothy Kosich††(2/22/10)
". . .this is an argument investors really should take seriously."
In his latest Basic Points, Hard Rocks and Hard Shocks, Coxe credits "Aaron Regent, Barrick's market-savvy new CEO" for "fueling the flames of desire" through the concept of peak gold.
Regent has noted "that new mined production of gold has been declining for a decade," suggesting this could prove to be the equivalent of peak oil, the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.
Much of the recent commentary on gold, Coxe said "is that Obama's deficits, coupled with Bernanke's money-printing, could produce either a Depression or runaway inflation. To us, this is an argument investors really should take seriously."
Coxe advised that "a holding of gold and gold sticks offers excellent protection under both extremes, and attractive potential under a regime of moderate inflation and modest recovery."
In his analysis, Coxe noted that a "big boost in bullion prices has not meant a big jump in gold productionóbut was actually accompanied by declining output. Rather, he adds, "the kinds of mining companies in which you should invest are those that recognize that each ton of ore taken out of ground brings the mine closer to closure."
Coxe has argued that "investors should overweight the gold mines and underweight the bullion if they are bullish on the metal, and reverse the strategy if they turn bearish on the metal." Coxe also advocates one other alternative form of previous metals investing, royalty and streaming companies.
In his investment recommendations, Coxe recommends investors "maintain high exposure to gold bullion and the gold miners whose production comes from politically-secure areas."