The Gold Report: Have you ever witnessed such a sustained period where the U.S. Federal Reserve and/or the European Central Bank have had so much sway over market direction? Is it sustainable?
Raj Ray: What we are seeing right now is a throwback to the Fed’s original goal of preservation of financial stability. Central bankers believe that maintaining financial stability is just as important as managing monetary policy. Only time will tell whether it’s sustainable, but it’s here to stay for the foreseeable future.
TGR: Are central bank decisions changing how you do things?
RR: As a mining analyst, the objective has always been to focus on companies with efficient operations, good management and capital discipline. In addition, I am looking for exposure to investments that to some extent can hedge the gold price risk as a direct result of central bank decision-making. A lot of miners’ favorable currency exposure has buffered the impact of an otherwise muted gold price. It’s not about changing what we do. It really is about sticking to the basics and being more diligent about what we do.
TGR: What is your call on gold as the traditional summer doldrums approach?
RR: I expect gold to oscillate around the $1,200/ounce ($1,200/oz) mark, but it will be economic-data dependent. The possibility of the Fed raising short-term rates has kept a lid on gold prices. The market seems to expect a June increase as unlikely. If the Fed decides to maintain rates, you might see a small uptick in the gold price to $1,250/oz.
TGR: Do you, like most other mining analysts, believe that it will be 2016 before the mining sector turns the corner?
RR: I believe …read more