Market Turmoil Roundtable: Foster Sees Mining Stocks Catching Up

August 15, 2011

HAI

Gold fund manager also believes coming recession is good for the yellow metal.

With financial markets experiencing their worst turmoil since 2008, Hard Assets Investor is conducting a virtual roundtable with commodity experts, asking them a series of questions facing investors during these tumultuous times. We hope this gives you some guidance when investors need it most. Today we speak with Joseph Foster, one of leading minds in the gold space. His fund, the Van Eck International Gold Fund, has delivered 11-plus percent compounded returns for more than 50 years. Previous Market Roundtable interviews are linked at the bottom of this interview.

Hard Assets Investor: How will the U.S. downgrade affect demand for commodities?

Joe Foster:  Aside from gold, I don’t see it having a direct effect on commodities

HAI: Do you think the Federal Reserve will initiate QE3? What impact will that have on commodities?

FOSTER: I think they will initiate QE3. I would have to break gold out from the other commodities, because we are in an environment where they will react differently. Gold will benefit.

HAI: Where do you see gold heading? Is there a price that is “too high” given the current environment?

FOSTER: There is no price that is too high. I do see gold heading higher. All the issues we are seeing in the U.S., along with the sovereign debt in Europe, inflation in China, these are problems that aren’t going to go away any time soon. There’s no real solution in sight. I think people are going to continue to use gold as a currency hedge and a financial safe haven.

HAI: Where do you see oil heading?

FOSTER: I see oil as weak. The supply constraints on oil and demand in emerging markets will provide support for oil. I wouldn’t expect a declining market as much as a soft market or a sideways market for oil.

HAI: What’s the best-positioned commodity for the current environment and why?

FOSTER: Gold. It looks to me like we are headed into another recession, which is going to create more financial stress that plays into the gold story. Other commodities will probably suffer in that environment.

HAI: Why are the gold mining stocks lagging so much behind the metal?

FOSTER: The underperformance of gold shares is extraordinary. We have never seen anything like this. It’s just an anomaly that can’t persist. Eventually these stocks will move up. The reason for it rising is costs. They have tremendous cost pressure. The earnings at these gold prices are tremendous. Eventually the market will come on to that.

 


 

Other Market Turmoil Roundtable Interviews

Patton: Slow Growth Not So Bad

Luskin Likes How Gold Is Poised

Kerr Sees Opportunity In Ag Sector

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