OUT AND ABOUT: Opening his address to the Paydirt 2012 Australian Gold Conference, Barry Dawes managing director of Sydney-based Martin Place Securities held a quick poll via a show of hands to ascertain the audience’s bull or bear sentiments towards gold.
The bulls took the result, which is probably not so surprising given the way the gold price is almost spoken of in reverential tones on any news service around the country each day.
For some people their day hasn’t started, or is yet to be completed, unless they hear how the price for the most precious of metals has fared in the last 24 hour period.
Many don’t really understand why they need to do this but they do understand it has something to do with the strength of the Australian dollar and whether or not they will need to be diligent with their money on their next overseas trip or will be able to spend like a sailor on shore leave.
In recent times gold has captured the imagination of the investment community.
They can’t be blamed really given its run over the last couple of years. Gold greeted 2009 at US$875 per ounce mark on its way to breaking through to enter the magical realm of US$1000 per ounce-land.
Lately it has been hovering between the low to high US$1600 mark.
Gold has been the only sure-fire go-to investment strategy since the Global Financial Crisis put the brakes on the 20 cent resources sector IPO market, when companies would list on an almost daily basis at premium prices.
Back at the Paydirt Gold Conference Dawes tipped a gold price of US$5,000 an ounce by 2016, suggesting he expected a price of at least US$2,000 this year with that high to be reached “quite rapidly”.
“We are bullish on gold and if you examine the historic price trends for gold – and we have to look long-term –a parabolic curve emerges that comfortably pushes the price to $5,000 in four years’ time,” Dawes said.
“I’m also confident that Australia will lift its annual gold output to 400 tonnes by that time from around 280 tonnes currently, if not by 2015.”
Dawes pointed to the success enjoyed by Australian gold explorers, in particular what has been achieved in Western Australia where resources had increased through activity in new areas as well as through brownfields upgrades.
He highlighted the influence new deeper drilling in old mining areas where previous penetration had been beyond 100 metres had also had on this success saying this deeper drilling was now delivering sound gold grades and intersections.
Dawes predicted solid earnings being reported and for gold equities to pay put some very attractive dividends.
“The most recent correction in the Australian gold index from the post GFC-highs in April had been an irrational 31 per cent whilst many smaller gold stocks had been hurt in the trashing of their share prices in recent years by over 50 per cent,” he said.
“Australian gold shares should now follow the recent major breakout in the United States of gold equities in 2010, which ended a period of 30 years of consolidation in the sector.
“The recent pullback there just corrected the strong run up from the GFC lows in 2008.
“We have got a long way to go before gold peaks out.”
Dawes rattled out the regular gold-bull line of gold now being a global commodity being traded against all main currencies, with strong physical demand.
He said this reflected a general lack of confidence in governments that was underlined by strong net buying by central banks, strong demand from jewellery consumers and the hoarding of gold in the form of coins or ingots under any number of mattresses around the world.
“Gold’s standing in Australia will always be a question of price but we forecast a surprising growth in earnings and dividends in gold equities and that will change things quite positively for these stocks,” Dawes said.