If you've been riding the gold rollercoaster, you probably know every turn in the track by now -- how the precious metal rose from close to $400 an ounce four years ago to more than $1,000 in April 2008. Inflation, oil, currencies, jewellery demand -- they all have an impact on gold prices.
As we enter the end of the Great Recession, where is gold headed next? How should you play it to make money? Join our live online discussion at noon (ET) on Tuesday, July 28th and bounce your questions off John Embry, who has researched the gold sector for more than 30 years.
Get a head start by submitting your question here. Your questions and Mr. Embry's answers will appear in the space below. Please note that he prefers to discuss the outlook for gold as an asset, rather than specific gold-based stocks.
Mr. Embry has been Sprott Asset Management's chief investment strategist since March 2003, with a focus on the Sprott Gold and Precious Minerals Fund. He plays an instrumental role in the corporate and investment policy of the firm. Mr. Embry, an industry expert in precious metals, has worked as a portfolio management specialist since 1963.
After graduating from the University of Manitoba with a Bachelor of Commerce degree, Mr. Embry began his investment career as a stock selection analyst and portfolio manager at Great West Life. He then became vice president of pension investments for the entire firm. After 23 years with the company, he became partner with United Bond and Share, the investment counseling firm acquired by Royal Bank in 1987. Mr. Embry was named vice-president, equities and portfolio manager at RBC Global Investment Management, where he oversaw $5-billion in assets, including the flagship $2.9-billion Royal Canadian Equity Fund and the $250-million Royal Precious Metals Fund, the #1 ranked fund across the country for its 2002 net performance of 153%.
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Sonali Verma, Globe Investor: Hello, everyone. Thanks for joining today's discussion, and special thanks to John Embry for taking our questions. We're having some technical issues -- please bear with us as we resolve them.
Reader Osoborus writes: Once the derivatives market collapses early this fall, do you see the situation in the global economy further unraveling to the point where by money literally becomes worthless... All confidence is lost in the system.... and we return to a tumultous dark period of using gold and silver as means to partake in commerce.
John Embry: That's a rather apocalyptic view. I suspect that the derivatives market will be kept afloat by the government supplying whatever money is required to keep the losing side of the derivative trade whole so the winning side can be paid. This will ultimately lead to rapidly mounting inflation that will benefit gold and silver hugely.
A reader identified as T Horton writes: There is some concern that gold ETFs do not actual own the physical gold, does this mean that ETF companies can sell unlimited gold ETF units, and create an artificial supply of gold substitute?
John Embry: Unfortunately, yes. I strongly recommend that investors buy physical or paper entities where the gold backing is audited and verified.
The fact that a number of anti-gold organizations were the backers of gold and silver certain ETFs should have been the tip off. They most certainly want to absorb legitimate gold investment and thus mitigate the upward pressure on the price.
Ron Stickel writes: Are there any countries in the world that look like they may be considering backing their currency with gold. If so which ones?
John Embry: I believe that the Chinese, who think in terms of decades rather than quarters as we do in North America, are already contemplating this route.
They have a history of knowing what can happen to a fiat currency system and they aspire to be the world's number one economic power and a gold-backed yuan would assist in this goal. Russia is also a candidate but lack the financial muscle of the Chinese.
Bruce Roberts writes from Toronto: There are some who are predicting another significant bout of deleveraging this fall that might result in another marked US dollar rally. I'd appreciate your thoughts on the likelihood of such an event and what it could mean for both the gold price and precious metal equities in the short to medium term. Thank you.