Against this backdrop, Winmill sees people pouring into gold, from retail investors to central banks.
FORBES: With Gold Set To Peak At $1,700, Miners Like Goldcorp Look Cheap
Winmill is the portfolio manager for the Midas Fund (MIDSX) and Midas Perpetual Portfolio (MPERX).
FORBES: INTERVIEW: Midas' Winmill: U.S. Fiscal Issues, Negative Rates To Propel Gold Higher Again
With that in mind, Winmill said looking ahead he would put a premium on Canadian companies.
FORBES: Mining Share Weakness Could Have Many Reasons -- Midas Fund
Winmill takes a long-term view on gold when he thinks about investments and prices.
FORBES: Mining Share Weakness Could Have Many Reasons -- Midas Fund
Winmill highlighted any concrete effort to fix the budget mess and any real tightening in real interest rates.
FORBES: With Gold Set To Peak At $1,700, Miners Like Goldcorp Look Cheap
Tom Winmill, portfolio manager of the Midas Fund (MIDSX), said there are a number of reasons why that could be.
FORBES: Mining Share Weakness Could Have Many Reasons -- Midas Fund
There has been interest in the mining community in Latin America as a region of untapped resources, but Winmill said risks remain.
FORBES: Mining Share Weakness Could Have Many Reasons -- Midas Fund
Given the general outlook, though, Winmill is sure that his long-term strategy of buying and holding on to gold equities will make money.
FORBES: With Gold Set To Peak At $1,700, Miners Like Goldcorp Look Cheap
But for investors to truly value the opportunity cost of holding Treasuries, Winmill expects real interest rates on 2-year Treasuries to hit 300 basis points.
FORBES: With Gold Set To Peak At $1,700, Miners Like Goldcorp Look Cheap
With gold prices at historic highs, populist governments, from Argentina to Venezuela, are tempted to renegotiate contracts and squeeze profits out of corporations, Winmill said.
FORBES: With Gold Set To Peak At $1,700, Miners Like Goldcorp Look Cheap
Further, this is a period of slower seasonal demand for gold jewelry, before this picks up in the second half of the summer, Winmill explained.
FORBES: INTERVIEW: Midas' Winmill: U.S. Fiscal Issues, Negative Rates To Propel Gold Higher Again
The biggest holding in the Midas Fund is London Stock Exchange-based Avocet Mining (AVM), which Winmill said is transitioning to become a bigger mining company.
FORBES: Mining Share Weakness Could Have Many Reasons -- Midas Fund
Looking toward the other side of the world, Winmill said he is not concerned about lost auto production out of Japan and the impact on platinum group metal usage.
FORBES: Mining Share Weakness Could Have Many Reasons -- Midas Fund
Uncertainties such as those surrounding the U.S. are among the factors that are leading many central banks to increase their gold holdings, particularly those in emerging-market nations, Winmill later added.
FORBES: INTERVIEW: Midas' Winmill: U.S. Fiscal Issues, Negative Rates To Propel Gold Higher Again
On the other risk, a real tightening of monetary policy, Winmill explained that the end of QE2 acted like a tightening of 300 basis points along the middle of the curve.
FORBES: With Gold Set To Peak At $1,700, Miners Like Goldcorp Look Cheap
Real interest rates equal nominal interest rates minus expected inflation, so with CPI averaging about 3.5% this year according to Winmill, at 2-year Treasuries at yielding 0.431%, real rates are actually negative, explained the fund manager.
FORBES: With Gold Set To Peak At $1,700, Miners Like Goldcorp Look Cheap
That led to less PGM usage during that time, but Winmill said auto production elsewhere in the world would make up for it and thus there would ultimately not be any knock-on demand for the metals.
FORBES: Mining Share Weakness Could Have Many Reasons -- Midas Fund
Winmill points at the debt ceiling debate as one of the factors helping to push the price of gold higher, recognizing that along with ultra-loose monetary policy, the government is running out of tools to bring down unemployment rates that have crept past 9%.
FORBES: With Gold Set To Peak At $1,700, Miners Like Goldcorp Look Cheap
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