Episode 89: GoldMoney’s Alasdair Macleod talks to David Baker of Baker Steel, a portfolio management firm with expertise in a variety of natural resources including gold and other precious metals. They talk about how gold mining companies are failing to communicate their true worth to investors and what they should do to change this.
Baker points to the recent underperformance of gold mining shares relative to bullion, and argues that mining companies should start thinking and communicating in terms of ounces rather than dollars. He says that forward selling of gold production made a lot of sense in disinflationary times, but that we are no longer living in such an environment. He concludes that mining companies should hold gold not dollars in reserve, and pay dividends in gold rather than national currencies. He even advocates that mining companies should arrange forward purchases of gold.
They point out the flaws with industry forecasts that project a falling medium-term gold price in dollar terms. They also discuss Chinese investment in gold mines, lack of possible western funding, and the political risk that affects many mines.
This podcast was recorded on 17 January 2013.