Gold Digger: The panic buy comes into play

Reuben Adams’ weekly Gold Digger column wraps the news driving ASX stocks with exposure to precious metals.

A new gold rush is looming, with stocks to be in huge demand, says Doug Casey.

A panic move into gold stocks is imminent, according to author and veteran investor Doug Casey, who says the flow of money will be like “trying to get the contents of Hoover Dam through a garden hose”.

In a recent chat with Kerry Stevenson of the Gold News Channel, Casey said gold equities, relative to other stocks, “are about the cheapest level they have been at in history”.

“Why do I like them? Because all in sustaining costs amongst worldwide producers are roughly $US1,000/oz ($1,360/oz),” he says.

“They are printing money (at current prices) but fund managers don’t care.

“That is going to change. I am heavy in gold stocks right now. Now is the time to buy.”

Central banks around the world are printing money like it going out of style, Casey says, which is driving up inflation.

Gold is widely regarded as a hedge against inflation, increasing in value as the purchasing power of money falls.

“The US government officially states that inflation is running at 7.8%, or some ridiculous number. Point of fact: retail prices in the US are rising well over 15%, on their way to 20% and even more,” Casey says.

“I think there is going to be a panic into gold.

“It is going to be fear, greed and oddly, prudence, which is going to drive a lot of money into gold stocks.

“(Gold equities) are just a tiny portion of the market, so when money really starts flowing it is going to be like trying to get the contents of Hoover Dam through a garden hose.

“Potentially explosive on the upside.”

Casey’s bestselling book Crisis Investing spent multiple weeks as #1 on the New York Times bestseller list, according to his website.

His follow-up, Strategic Investing, “received the largest advance ever paid for a financial book at the time”.

He describes his contrarian approach to investing as “identifying a trend before the crowd [to] get in at the lowest price and expose you to the upside for the longest period of time”.

Other famous contrarian investors – who buy and sell in an opposite direction to the general market sentiment – include the legendary Rick Rule.

“In capital intensive cyclical businesses like mining, 10 baggers happen because you buy out of favour sectors before they return to favour,” Rule says.

“And when they return to favour you must remember to sell.”

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