Norm Lamarche

We’ve been fielding a number of questions about the gold and precious metals sector recently, more specifically, why we are not buyers on gold? Let’s start there. The price of gold bullion has been exceptionally volatile recently, dropping $250/ounce over a two-day period in mid-April. Bullion has now given up $500/ounce from its highs in September, and is now, technically, in a bear market. Gold equity shares are down 40% year-to-date alone. So what’s up (or down) with gold lately? Gold bullion and precious metal shares have been in profit taking mode for much of 2012 and early 2013.

Norm Lamarche: It is difficult to find a period of time when the Canadian resource sector has been so out of favor. The period post-Asian contagion, from 1998-2000 comes to mind. In that period, a western economy was healthy and growing, and had absorbed the emerging nations’ issues of 1997-1998. Commodity prices had recovered, reflecting worldwide economic fundamentals, but the resource stocks remained out of favor because investors were funneling money into sectors deemed more exciting. The technology sector at the time was taking cash flows away from the resource sector.

As we enter 2013, it appears as though the world economy is transitioning from deceleration to acceleration. The U.S. economy is the leader. U.S. growth has been very resilient, despite its own political, fiscal-cliff issues. U.S. economic growth is becoming qualitatively better, as it continues to broaden into other sectors of its economy, such as housing/construction, and consumption.

On the economic front, it is becoming evident to everyone that the United States is leading the charge out of the global economic slump. Industrial growth and manufacturing activity is also spreading to other sectors, such as real estate, construction, etc. This has been going on notwithstanding all the discussions (noise) about fiscal cliff and debt ceiling.