Gerardo Del Real: US$5,000 Gold is Reasonable, but Comes at a Price

A gold price as high as US$5,000 per ounce isn’t out of the question, but according to Gerardo Del Real of the Outsider Club, it would not come without a cost. 

“I actually think US$3,000 to US$5,000 is very reasonable,” he said when asked about the yellow metal’s potential at the New Orleans Investment Conference.

“If you look at it, we’re at US$1,500 right now, so US$3,000 is a 100 percent move. That’s not — you look at what palladium‘s done, a 100 percent move in gold isn’t by any stretch of the world (an) incredible performance if we’re talking the next five to seven years. Even if we get US$5,000 gold, you’re talking a couple hundred percent.”

 

But, Del Real warned, prices that high would come with increased volatility. “I think it’s going to get more volatile, unfortunately,” he explained. “There’s a real human toll to that. So yes, we can be excited about US$3,000 to US$5,000 gold, but, you know, understand that it’s going to come with a lot of volatility.”

While that’s not the best news for investors, Del Real also noted that even a much smaller increase in the gold price would positively affect select juniors. “The exciting thing to me is the leverage the juniors provide, because the prices are so depressed in these equities that the rerating’s going to be quick.”

In terms of stocks to watch, he suggested that market participants look not at companies that are trying to make discoveries, but at those that already have good assets to work with.

“The Midas Golds (TSX:MAX,OTCQX:MDRPF) of the world, the Revival Golds (TSXV:RVG,OTCQB:RVLGF) of the world. The Almaden Minerals (TSX:AMM,NYSEAMERICAN:AAU) of the world — these aren’t companies looking to discover an amazing deposit. These are companies that already have the asset in the ground.”

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