Still A 20-Year Uptrend

10/03/2013 7:00 am EST

Focus: COMMODITIES

Mark Leibovit

Chief Market Strategist, VRTrader.com

The recent rally in gold is no surprise to gold bug Mark Lebovit who shares his view of the recent drop and what he sees ahead.

SPEAKER 1:  Hi, my guest today is Mark Lebovit and we’re talking about gold.  Hi, Mark, and thanks for stopping by.

MARK:  Hi, I’m a gold bug.

SPEAKER 1:  You’re a gold bug.  You’re still bullish on gold.  How high do you think it’s going to go?  Well it’s started moving up again now.

MARK:  That big picture camp where you know we had a down cycle for 20 years from 1980 to 2000.  We’re at 20 year of rough up cycle which should carry us into 2020/2025 zone so I think we have many years ahead.  The big chart of gold, we just had a big picture uptrend.  We had a very nice correction.  If you think of a stock that dropped from 19 to 11.5 that’s sort of what happened.  We’ve seen this many times in other markets.  We’ve seen the Dow Industrials drop 40%/50% and come all the way back and double in price.  It’s just another big, big correction.  I mean I actually put out a video.  I was up in Canada business.  There was network back in September I was saying it looked like a top sell and we were going to go down.  It wasn’t a surprise to me technically.  I was a little surprised how far they went, but we were in a downtrend.  Downtrends tend to get carried away.

SPEAKER 1:  What are the catalysts that you’re seeing now that are going to drive it higher?  Is it you know worldwide economic problems, the fear, uncertainty?

MARK:  We have a war cycle that’s underway.  War cycles are growing here.  You see what’s going on in Egypt now.  We have unrest all over the world.  We have unrest in this country on a certain level; not as great, but I think you’re going to see more of that.  I think that becomes a refuge.  Interest rates are going to start moving higher and start the gold and interest rates up together.  Some claim there is a shortage of gold because many producers now say their cost of producing is $1300 an ounce.  If you’re trading at 1350 there isn’t much profit so a lot of companies have shut down operations.  A lot of exploration companies find money to explore so there is going to be less of it around.  Also, you have the Chinese that are hoarding gold.

SPEAKER 1:  Yes.

MARK:  They’re buying up the market.  The gold is moving from the West to the East.  Why?  Because I believe China ultimately wants to see their currency as a reserve currency.  There are a lot of reasons that it’s going to go up.  The other main reason it’s still a big major bull market.  We just had a correction.  The financial press got all over it; the end of gold.  It was just a big shake out.  That’s my opinion.  I think over the next it will be one to five years, 5000, 10,000 all kinds of numbers are possible.

SPEAKER 1:  That’s amazing.  Are you a buyer of the actual bullion or do you recommend people buy mining stocks, ETFs?

MARK:  All of the above.  It depends on what your perspective it.  I think the bullion, the physical bullion, or the coins are a good hedge, is a good hedge.  Just keep it in a safe place.

SPEAKER 1:  Right.

MARK:  The stocks I think are way undervalued.  They got way over done.  I was at the gold forum in Denver I think it was around September/October 2011.  I remember Newmont Mining trading at $75 a share, and the president coming out making a big presentation because they had raised the dividend.  The stock dropped into the 20s.  It’s now 50 points on the high.  This company is not going out of business.

SPEAKER 1:  Right, it’s been around a long time.

MARK:  A long time.  I mean you know in fact, it wasn’t Newmont maybe it was Homestake Mining in the 1930s was the best performing stock.  It went up like 600% because gold did well in the Depression.

SPEAKER 1:  Yeah, the uncertainty, right.

MARK:  There is going to be recovery here.  I would say if you’re going to play the shares, my recommendation is more the ETFs that give you a basket of the various shares because you may pick the one that’s losing more money than the other.

SPEAKER 1:  Yeah, right, exactly.

MARK:  I’d rather buy, for example recommend GDX which is the market vectors gold miners ETF.  There is a more speculative one, GDXJ which is the junior gold miners.  In fact, I had them in my VR Trader newsletter this past week.  We did very well on our short-term trade there.  They moved up very nicely.  Yeah, I would say the miners, the physical gold.  We can’t forget about silver.

SPEAKER 1:  Yes, right,

MARK:  Silver is a big play.  It actually did better than gold on a percentage basis.  This move is a big speculative interest in gold and silver.

SPEAKER 1:  And silver.

MARK:  Silver I think could get more speculative if the market really has turned.  Can’t forget about platinum and palladium industrial metals.  Palladium has done actually better than gold on percentage basis in the last year or two if you look at it.

SPEAKER 1:  Interesting.

MARK:  I’m a big buyer of palladium as well.

SPEAKER 1:  Super.

MARK:  They claim it’s mostly related to the catalytic converters and the auto industry.

SPEAKER 1:  Right.

MARK:  There are a lot of speculators in the platinum and palladium based on historical relationships.  WE can’t forget about copper.

SPEAKER 1:  Right.

MARK:  Copper is an integral metal.  I don’t believe all the hogwash that China is going downhill.

SPEAKER 1:  Right.  They just slowed.

MARK:  Right, they slowed a little bit.  We haven’t been growing hardly at all.

SPEAKER 1:  Right, and 7% is pretty good, right?

MARK:  Right, and they talk about the empty cities and a lot of stuff over there.  My contacts in the Far East tell me things are great and the press in this country is sort of biased against the Far East.

SPEAKER 1:  Right.

MARK:  It’s the same black dog press we’re talking about.

SPEAKER 1:  Right.

MARK:  They like to downplay China.

SPEAKER 1:  Yeah.

MARK:  and the up play the U.S. when the truth is the strength is in the Far East.  The world’s economics are moving to the East.

SPEAKER 1:  Yes, that’s true.

MARK:  That’s the bottom line and we’re going downhill just the way Britain went downhill and they were the top power in the 18th century and we were the top power in the 20th cetnurry.

SPEAKER 1:  Yes, it’s all cyclical.

MARK:  We’re going down overall.

SPEAKER 1:  Right.

MARK:  It’s the East where it’s the balance of power and that’s really the story.  As far as the metals, yes you should be a buyer.

SPEAKER 1:  Wonderful, thank you, Mark.  Thanks for being with us on the MoneyShow.com video network.

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