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Rob McEwen: If You Don’t Own Gold, Start Looking at It

The Investing News Network (INN) spoke with Rob McEwen, chairman and chief owner of McEwen Mining (TSX:MUX, NYSE:MUX), about what happened to gold and silver this year and where he sees the precious metals heading in 2019.

McEwen noted that 2018 saw a “total lack of interest” from investors towards the yellow and white metals. However, he explained that lately there have been some “rays of sunshine,” and that these metals are not to be counted out — they will rebound in the new year, and McEwen expects prices to increase.

“I expect a better price in 2019. You’re seeing in many currencies, the price of gold has been increasing, and some quite large increases have occurred in countries where the currencies are in doubt, such as Turkey, Argentina or Mexico. In local terms, the gold price has climbed quite significantly,” McEwen said.

Read on as McEwen shares what he believes are the reasons behind the movement of the precious metals in 2018, why he sees them faring better in 2019 and the various projects in the pipeline for McEwen Mining.

INN: In 2018, what was the most challenging aspect for the gold and silver markets?

RM: Probably the total lack of interest by investors. Volumes have been light, there have appeared to be some big swings and those investors in the market are nervous. So going around, you talk to accounts that traditionally buy gold they’re still reeling from redemptions. There are some rays of sunshine there are some other people looking at the debt that haven’t been in the gold market and they’re starting to come back to it or enter it for the first time. But I just say there’s been a couple of false starts in ’16 and ’17, now ’18.

INN: In 2019, do you expect a better market for gold or worse? And for silver will it be more of the same or will it vary from gold?

RM: I expect a better price in 2019. You’re seeing in many currencies, the price of gold has been increasing and some quite large increases have occurred in countries where the currencies are in doubt such as Turkey, Argentina, or Mexico. In local terms, the gold price has climbed quite significantly. So if you look around and when this confidence in the dollar stops or weakens and that seems to be the biggest driver today, is that the dollar has remained very strong and all commodities, as a result, have put on weaker performance.

I think we’re getting to the top. If you look at the broad market, some of the tech stocks have sustained some large falls. The rest of the market wasn’t following those stocks. I’d say there’s a greater risk of the broad market coming down, then the gold market going any further down. It’s more likely you could see a doubler spilling gold and precious metals stocks than you’ll see in the broad market.

INN: Do you have any advice for investors who are new to the gold and silver markets?

RM: Sure. One, history is something one should always look at in the market. You’re not always assured that it’s going to repeat itself, but if you look over a long period of time, say, in the last 48 years, if you look at the relative value of commodities which would include gold, relative to equities, we’re at a 48-year low. We are in a cyclical business, and there are bottoms and there are tops, and we’re currently near the bottom of it.

If you look at gold equities, in the last 77 years, so go back even further, there have been eight bear markets in gold equities and the last bear market that we had ended at the beginning of 2016, it was one of the longest and it was certainly the deepest of all the bear markets that have occurred in that last 77 years. So from my standpoint, saying, while the downside risk is there but it’s small, given the historical account and the depth it fell to.

If you look at the same period, there have been six bull markets and the average return of the six, from the bottom to the top of the cycle, has been 540 percent. So we are currently in a bull market, although a lot of people might argue that, but that started in 2016 and there are a number of gold stocks that — they’re probably going to surprise your audience — that have outperformed the Dow and the S&P in the last 22 months. So we’re about a third of the way through the average cycle time and we’re up about 150 percent. So you could get a double or a triple from here as a potential for gold equities.

We have seen some gold stocks exploration companies coming out in the last 3 months with very good exploration results, assay results, and they’ve run in some cases 500 percent in the last 3 months, given a little bit of that off but given the fact that they’re into a market that is starting to pay attention to drill results, whereas, and you’ll see, I think, the frequency of M&As [mergers and acquisitions] is starting to pick up. Companies buying other companies, consolidation in the industry.

So six months ago, no one was paying attention to anything, but you’re starting to see this movement, and I think when investors start seeing money being made in the sector again, they start coming back. When investors are looking at the sector and seeing even the biggest companies putting on very poor performance, having lots of debts, selling off assets, their share price dragging them on the floor, listen well, what’s the chance that you’d make any money on that sector? But now you’re starting to see some improvements and that is being translated into some excitement in drill results. And that, as I’ve said, once investors see that they can make money in this sector again, they start moving back in.

Most of the selling has occurred in the short positions and they’re out there on a lot of the stocks, the volumes are very light, given that most of the selling has finished. Any new interest in there in light volume tends to move the stocks higher. So I think it’s an opportune time to be taking a look at the sector then maybe starting to make an investment here because I think the upside is quite compelling.

INN: You mentioned the frequency of M&A. Do you have an understanding as to why that’s become more popular lately?

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