the end of Embry's Vancouver speech, Jan/2010 : "More importantly, if gold were overpriced (@ $1,100), the gold producers would be experiencing an earnings bonanza. A close examination of the recent earnings statements of most major gold companies reveals that they are earning very little and are certainly not achieving the return on capital necessary to justify their involvement in a very risky and difficult business.
I find sentiment in the sector to be remarkably subdued in the face of compelling fundamentals. Many attractive junior gold stocks are not even keeping up with the rise in the gold price. If history were any guide, these stocks would be rising at three to four times the rate of the gain in the gold price, but investor skepticism is holding them back.
From a media perspective, if we were approaching the end of a bull market, the newspaper articles and television clips would be universally bullish touting the obvious merits of the yellow metal. There is indeed more coverage recently because of the relentless price rise, but it tends to be skeptical with the bearish commentators continuing to get the most exposure despite having been continuously wrong.
There is no better example of this than an individual who my compliance department would prefer that I not identify. However, I'll give you a broad hint -- he writes virtually daily for a noted Canadian gold Internet site. Dubbed the Tokyo Rose of gold commentators, he is always quoted in articles with a negative slant despite having been consistently wrong since the inception of gold's bull market. In my opinion, as long as he gets any press at all, we are a long way from the end of this bull market in gold.
Finally, it is widely acknowledged that if the peak gold price in the last great bull market ($850 in January 1980) were to be adjusted to reflect the U.S. inflation rate in the intervening period, it would be equivalent to $2,300 today. That the current gold price is approximately half of that should put to rest any suggestion that this is a bubble.
That's not to say there aren't several bubbles forming in other financial markets (most notably in government debt instruments) as a result of a new bout of central bank madness, but gold is not on the list. In fact, I believe that we are many years and several thousands of dollars in price away from the end of this powerful bull market.
In conclusion, I now firmly believe that the chances of gold ever trading below $1,000 per ounce are remote. The only caveat I would offer is that if the world suffered a catastrophic deflationary collapse, an outcome long predicted by the noted Elliot Wave theorist Robert Prechter, gold could briefly be swept under but would then re-emerge with even greater relative strength as the only true safe haven. However, in a world of pure fiat currency, I think that a near-term deflationary outcome is highly unlikely. In fact, I strongly suspect that gold is going to stage a parabolic rise from current levels in the not-too-distant future, a development that will come as a shock to the many detractors of the world's only real money.
Gold is the only real money because it isn't someone else's liability.
This remains one of the best supply-demand imbalance stories I have encountered in my long career and it will only be enhanced by the existence of massive short positions that will be impossible to cover amid myriad paper claims on gold that dwarf the physical supply, which, by the way, is a subject for another day.
Thanks very much for listening. It has been an honor to speak to you."
