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The price of gold has been the second-most talked about news story of the week, after the precious metal had its single largest one-day fall in 33 years on Monday. While the usual suspects – gold bugs, technical analysts and market strategists – are lining up to offer predictable views on where gold is heading, there's a fresh voice in the debate: former Alcan CEO Richard Evans. What he says will please the bugs.
Mr. Evans, you'll recall, sold Alcan at the height of the commodities cycle in 2007. When stock markets hit bottom as investors fled in 2008-09, Mr. Evans jumped in, earnings handsome returns since then.
Given the genial Mr. Evans' solid-gold track record for timing the market, we were therefore intrigued by the fact that last month he joined the board of junior gold mining firm Tyhee Gold Corp., which is trying to develop three properties near Yellowknife. Tyhee is about 30-per-cent owned by Montreal financier Hans Black and his affiliates, and he is a noted gold bug who told his investors this week that gold's steep fall was "a marvellous buying opportunity."
Is Mr. Evans, the man with the golden touch (he lives in the Golden Gate city, to boot), about to be a third-time charmer? Certainly you couldn't find a more out-of-favour investment than a junior gold mining stock, and within that sphere, Tyhee is even less loved than most, having raised millions of dollars from investors with little to show for it (the stock is trading so cheaply – less than 10 cents a share – that this week's events barely caused a ripple). But the company has new management, new investors, properties in a safe jurisdiction and, according to Mr. Evans, promising geology.
But there's something more that has drawn in Mr. Evans: His belief that the metal is at "potentially a good entry point, after having some of the fluff removed from it."
Mr. Evans, who professes to be no gold bug, believes, like many technical analysts, that the price could fall by a couple of hundred dollars more (it closed Friday at around $1,400 U.S. an ounce, down 7 per cent on the week). But he also sees a $1,000 upside to current prices in the next five years. "I wouldn't be surprised to see gold dip further," said Mr. Evans. "But … I think we're getting to the point where the upside is greater than the downside in gold."
Mr. Evans can no more call the gold price than you or me, but he's tying his fortunes (or the $400,000 worth that he spent on Tyhee stock) to an argument that the open-spigot easy-money policies of the world's central banks will undermine currency values, give way to inflation and economic malaise, and fortify gold's eons-old reputation as a dependable store of value. The contrary argument remains logical – that gold's runup was way overdone given it wasn't associated with an inflation spike as was the case in the 1970s and the threat of central banks following Cyprus's lead and selling more bullion reserves could depress prices. But with the money presses chugging along and no end to all the global economic malaise in sight, don't be surprised to see Mr. Evans score a hat trick.
Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff.
Sean Silcoff