With every new peak in the gold price, we seem to miss the point.
It’s been less than a year since gold first grazed the $1,200 mark, and mere months since it sustained itself in a somewhat jagged pattern around that level. We gold bugs are like magpies where even numbers are concerned; I remember well the buzz in the room when the spot price bumped across the $400 line some seven years ago, and each incremental increase is no different. And, in similarly birdlike form, we are not satisfied with such a new development until we can peck it very nearly to death.
You might have noticed, if you’ve been following the natural resource sector for longer than approximately 30 seconds, that the gold price at hand is never the gold price in question. Analysts and commentators tend towards a fondness for the Hot Dog Eating Contest mode of speculation, in which the current state of things is rapidly stomached and barely digested before focus turns towards the next dip in the dollar, the next economic headline, and above all, the next even number.
In short, we don’t want to talk about gold. We want to talk about where the gold price will go next.
In doing so, however, we bypass the investment opportunities that not only form the foundation of the sector itself, but remain largely and quietly impervious to the headlines we so fervently hang on. Because regardless of where we find our next even-numbered toehold, the completely undramatic fact remains that a truly viable company is a viable company at virtually any gold price.
The scrapes and bruises that the natural resource sector has sustained over the years—most notably and most recently the Bre-X debacle and the crash of 2008—have resulted in a general intolerance of hot air. One can be reasonably sure that if a project makes it past the hurdles of acquisition, exploration, prefeasibility, and permitting, the chance that the whole thing will end with fake drill core and a helicopter accident is pretty damn low. The question in most cases is not whether a project will succeed, but rather to what extent. And such information is pecked not from crystal balls but from standard due diligence; experience and capability of management, strength of cash position and rate of burn, resource estimates and availability of access and infrastructure will always divulge a clearer picture of an investment prospect than will the oracles and soothsayers of the gold price.
Of course, this is all just terribly unsexy. If simple research can determine whether a company or project will remain viable right on down to a rock-bottom gold price—which many certainly will, otherwise they most likely never would have seen the light of public trading—then where’s the fun in drawing up complex economic theories that involve shoots and ladders and Keynes and charts and gypsies? Oh, also China and Europe. We are ever so fond of talking about China and Europe these days.
