A Lebanese gold trader hands over a 12 kilogram gold bar at his warehouse in Beirut.
The Source John Ing, president, Maison Placements Canada Inc.
The Idea Buy shares of gold mining companies Centerra Gold Inc. , trading at $10.50 a share, Eldorado Gold Corp. , trading at about $14, and East Asia Minerals Corp. , trading at $1.89.
Mr. Ing, a veteran Bay Street gold bug, has been forecasting a big breakout in gold that could take it to $2,000 (U.S.) an ounce and beyond next year mainly because of the anticipated tumble in the U.S. dollar. As long as the United States tries to spend its way out of its current financial quagmire, "the dollar can only go lower and gold can only go higher," he says.
Among major gold producers, Mr. Ing favours Centerra, "one of the cheapest of the big gold companies," because it is mining in the Kyrgyz Republic and Mongolia in Central Asia, "not popular areas for gold miners right now." Centerra mines 600,000 ounces of gold a year from the two countries, making it a "sizable" producer.
His second choice is Eldorado Gold, which produces about 330,000 ounces of gold a year. This number is expected to rise to 500,000 ounces next year as it merges with Sino Gold Mining Ltd., he adds. This will make it the largest foreign gold producer in China, a country that is both a large producer and consumer of gold, and where demand is outpacing supply.
East Asia Minerals, an Asian-based Canadian company, is Mr. Ing's third choice. The company's shares have risen from a low of 13 cents over the past 52 weeks to a high of $3.10 last summer, but have since pulled back.
"I visited it last week in Indonesia, and it's one of the most promising gold discoveries I've seen in some time." Drilling on the company's prospects indicates a potentially large deposit, making East Asia an appetizing takeover candidate for one of the reserve-hungry majors, Mr. Ing notes. It is also exploring for uranium in Mongolia.
The Payoff Potentially large capital gains as gold bullion soars past $2,000 an ounce next year and shares in gold miners, which have lagged the bullion price rise, catch up, Mr. Ing says.
The Big Risk U.S. President Barack Obama and other U.S. policy makers "wake up with a big hangover, decide to stop spending, raise interest rates, start saving and raise taxes," he says. "I don't see any of this in the cards."
Why Listen to John Ing? Mr. Ing, a China expert, has been following gold stocks for the past three decades. While he has been branded a perennial gold bug, his stock picks have done very well over the years, especially now that gold bullion appears to be on a sustained upswing, mainly because of shortages of physical supply.