Gold: Bull Market "Just Beginning"

"I am absolutely convinced that we will not peak in 2009..."

FORMER EDITOR-IN-CHIEF of the first German newsletter to cover the Neuer Markt, Sascha Opel brings a distinctive outlook to gold and the precious metals market.

Also co-chief editor of Der Aktionaer – one of the biggest German stockmarket magazines – and advisor to an investment fund that achieved 700% returns in three years, Opel now runs Orsus Consult GmbH, publishing one of the most popular German newsletters on commodities and junior mining and exploration, Rohstoffraketen.

Here Sascha Opel speaks to the Gold Report about his outlook for Gold Investment in 2009 and beyond.

The Gold Report: Sascha, we last interviewed you in May 2008. At that time you felt that we were beginning a period of re-establishing gold as currency. Would you review your thinking on this viewpoint for our readers?

Sascha Opel: In our last interview, I said, "Long-lasting gold bull markets take place when gold's role as money is being re-established. In my opinion, we are just beginning this period of re-establishment. Those calling for the end of the precious metals bull market any time soon are sadly mistaken."

Today, although nine months have passed, we are still in the beginning of that period. Look at Gold Prices in all currencies around the world – not only in US dollars. Look at the Gold Price in Euros, Canadian Dollars, South African Rand, Australian Dollars, the British Pound, Norwegian Krone, Russian Rubles, Swiss Francs...Gold is now starting to establish new all-time highs in all those currencies. The masses will slowly realize that no paper currency is safe in the near future.

TGR: The world has gone thru a major deleveraging and financial turmoil since our last conversation. How have recent developments changed your view on gold as a currency or as an investment?

Sascha Opel: I have not changed my view. It is still the place to be as an investor.

TGR: Do investors view gold differently in Europe than North America?

Sascha Opel: I can only speak for retail investors in the German-speaking countries like Austria, Germany or Switzerland, where we have most of our clients. It was a year or 18 months ago when the first few people from the Street started talking about gold. The last precious metal show for private investors in November in Munich was very interesting: At the booth for Germany's biggest gold- and silver-coin dealer, there were five lines of people buying physical gold. I saw thousands of Euros being "changed" into real money – gold and silver.

TGR: If you see gold as a currency, what advantage has gold versus other currencies?

Sascha Opel: For me, what's most important is that gold has no risk of failure, like corporate or government loans and bonds. These have to pay interest; someone takes the risk to lend them the money. If you own gold you are completely independent from any government or any other institution in the world. You don't owe anyone anything.

Because of this advantage you get no interest. But the aim of the international banking cartel and politics in general is to make you dependent. That is probably the main reason why the establishment fights against gold. In their opinion, everybody should put his money into corporate or government bonds. Otherwise they denigrate you as "anti-American" or "anti-European".

TGR: You believed gold would remain around $800 for the short term. Some newsletter writers are calling for gold to rise above $1,500 by year-end. What is your view on the price of gold for 2009, both short term (say, the next quarter) and long term (through the end of the year)?

Sascha Opel: In May 2008, when gold was around $900, I thought it would go down to US$800 for several reasons I mentioned at that time. We went down to $720 until autumn 2008. Now we are back at $900 and will perhaps go up to $1,000 or $1,050 by the end of March. So I was very lucky with my prediction. But - as I told you in the answer to your first question – it is very important that gold started to climb in nearly all currencies around the world. In US dollars we will make new highs this year, perhaps by the end of 2009.

TGR: What factors should investors look for as a signal for gold to "take off?" What factors should investors be looking for that gold has peaked? Should we expect gold to peak in 2009?

Sascha Opel: I am absolutely convinced that we will not peak in 2009! I believe that the price of gold is manipulated. I believe that we will go over US$1,200 by the end of 2009, but I am not sure if we can defend that level. The establishment surely will do something so that the price will not go too high in too short a time.

In looking back at the rise of gold from $35 to $850 during the '70s, the former Fed Chairman Paul Volcker said, "It was probably a mistake to allow gold to rise so high." And Volcker now is on the Obama-Team. So we will not have a peak like 1980, but gold will rise constantly. Buying on dips like in autumn 2008 is the best strategy, in my opinion. Perhaps sometime later (in a few years, but not '09) gold will start to move US$50 or US$100 for some days in a row to US$2,500 or more. Then I would sell or hedge some "virtual" gold over the markets (futures, Gold ETFs, short-certificates etc.), but I would not sell the physical stuff.

TGR: In our last discussion, you suggested investors own physical Gold Bullion, making it at least 5% of their portfolio. Do you still feel it is important to own physical gold given the premiums required to acquire it at this time? Wouldn't owning a Gold EFT do the same thing?

Sascha Opel: I do not trust all these ETFs and other constructions – even if they tell the investors that the gold is held in this or that bank. If you want to speculate for a few months, then ETFs are fine, but not for me. I own gold for other reasons than speculation.

TGR: In May, you felt that junior producers and exploration companies had the potential for the largest returns. Do you still feel that way given that so many juniors/explorers are facing financing problems? Some of our recent interviewees have steered investors to major producers. Their logic is, with prices so beaten down on the majors, why take the risk on juniors or exploration? What is your feeling about this investment strategy?

Sascha Opel: I am still convinced that Gold Mining juniors/explorers have the potential for bigger returns. I like well-financed explorers or "special situations" like potential takeovers.