Analyst for Van Eck talks gold and miners.
[This interview originally appeared on HardAssetsInvestor.com and is republished here with permission.]
Gold analyst Joe Foster is the investment team leader for Van Eck’s flagship gold fund, the Van Eck International Investors Gold Fund. He also serves on the investment teams for the Van Eck Global Hard Assets Fund and the Van Eck VIP Global Hard Assets Fund, and is an advisor to the Market Vectors ETF Trust – Gold Miners ETF (GDX | B-57) and Junior Gold Miners ETF (GDXJ | D-29).
Foster has been in the mining and investment business for more than 25 years and is frequently quoted in the Wall Street Journal and Barron’s as well as being a frequent guest on CNBC and Bloomberg TV. Hard Assets Investor Managing Editor Sumit Roy recently spoke with Foster about the latest outlook for gold.
HardAssetsInvestor: How would you characterize the gold market right now?
Joe Foster: I'd characterize it as it's forming a base. I think we've established the lows around $1,200 an ounce and it's in a bottoming process. We’ll spend most of the year in a range, but the likelihood is for prices to go higher, not lower.
HAI: Inflation hasn't been a notable factor for many years now. Do you see that changing any time in the not-too-distant future?
Foster: Possibly, yes. The unemployment rate is coming down. The main driver of inflation is labor and wages. As the economy continues to pick up and more people find work, there is a shortage of qualified people out there. We could see some wage inflation sometime in the next couple of years that may concern people.
HAI: Will that inflation drive gold higher?
Foster: Gold's driven by financial stress. The source of the stress doesn't matter. You could have bad levels of inflation or deflation. You could have banking problems or geopolitical problems. Anything that adversely affects the financial system drives gold.
HAI: The crisis in Eastern Europe boosted gold temporarily, but over the longer term, can geopolitical factors sustainably boost gold?
Foster: Historically, it's been a short-term thing when you have wars breaking out or invasions or things of that nature. It could turn into a longer-term thing if it were to affect the global financial system in some way. That's kind of the bottom line. Geopolitical problems only drive gold so far as they affect the financial system. That's why when you have unrest in a place like Libya or Syria, that causes problems locally, but it doesn't really affect the global financial system, and thus doesn’t really affect gold.