Industry Overview - Diggers and Dealers 2007: Day 1
Merrill Lynch
Date: August 6, 2007
Gold going to US$1000/ozPierre Lassonde made the opening address at the 15th Diggers and Dealers conference and gave a bullish presentation. His view is this super cycle will last a generation (i.e. 20 years). He predicts that gold price will reach 4 figures, i.e. at least US$1000/oz in the coming years, as the US$ continues to weaken (especially against the Chinese RMB), robust jewellery and investment demand continues backed by reducing gold supply and lack of exploration success...
Summary of PresentationsPierre Lassonde – 20 Year Bull Market – Gold and Oil the picksDuration of the last super cycle was 14 years, 1966-80, and base metal prices peaked before gold and oil... So far, gold has risen from US$250/oz to US$675/oz which is up 170% so far...we are heading back to the future...
Gold production has been coming down 1% pa for the last 10 years and will not improve for at least the next 5 years...
Gold as a currency – the current account deficit in the US is now over 6% of GDP. PL believes that the US$ will continue to go down and the dollar is ready to crack downwards. When this happens gold will rise substantially over the next 2 years.
Inflation on the rise – PL states there is a tsunami of liquidity washing over the world which is increasing inflation. There are excessive US$ reserves in Asia and inflationary pressures are good for gold...
PL believes this cycle will last 20 years. Yes, there will be corrections but they will not stop growing in China and India...
In 1966, the DOW was 984 and gold US$35/oz for ratio of 28 to 1. In 1980 when gold spiked, the ratio got to 1:1. The current ratio is around 20:1 with the DOW 13,000 and gold US$675/oz. Looking at excess liquidity and US$ pressures PL believes that gold will continue to rise. The DOW to gold ratio will be 2:1 and gold will reach 4 figures – i.e. >US$1000/oz in the coming years...
The above information has been redacted from the article as it originally appeared in Merrill Lynch’s Industry Overview August 6, 2007.
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