Before we talk gold, we talk farms. Mickey Fulp – the Mercenary Geologist – is a newsletter writer, resource stock junkie and gold buyer. He is also a hobby farmer and in an interview Tuesday amid the unfolding Roundup conference in Vancouver he brings up an interesting fact about rabbits and why you might favour them as farm animal.
Fulp, who has a rabbit herd – along with cattle – on his farm in the US Southwest, noted they’re a favourite among survivalists. Rabbits are known for their highly efficient digestive system, Fulp said. They turn pretty well any feed into protein better than any other farm animal. Like porcupines, they eat all but the thickest tree bark, even pitchy coniferous trees. And they have a particular palate for citrus. Orange peels are their favourite, Fulp told me, though they eschew lime and lemon peel. This is perhaps one of the few picky points in their appetite.
Gold and rabbits. Perhaps both can be considered strategies of diversification.
Fulp met me at a popular cafe in Vancouver on Thurlow and West Pender to talk gold, among other subjects, not far from his Vancouver condo, a second residence. He’s dressed in suit and tie; ready for an afternoon meeting with a uranium junior intent on getting him to like their Athabasca projects and, hopefully, to proselytize them.
It’s not his first meeting with the junior. Fulp can be hard to get. There are some juniors he’s walked out on during meetings that won’t love him. Bunnies too. At least the dead ones. Fulp favours a .22 calibre rifle to dispense the chosen members of his herd when he’s hungry or bartering services with meat. In this respect some junior management teams might consider themselves lucky to have escaped meetings with Fulp alive.
Fulp follows the gold market closely and tends to buy yearly on lows. Last year, as he is wont to do, he bought 50 ounces gold, mostly placer, in the early summer when gold prices tend to hit a seasonal low. He’s now in the market for 50 ounces more. Indeed, he said he’d consider going down to the local bullion dealer while he’s in Vancouver over the next week or so to buy a couple ounces gold were the price to dip. To Fulp the reason to own gold – asset diversification, not owning only dollars – is paramount. He doesn’t look at the gold price these days in terms of whether it’s in a bubble. It’s insurance.
Which is not to say he’s constantly hoarding. He pays close attention to timing his buys, which was one of the reason’s I was curious about his thoughts on gold this year.
“I think we’ll have at test of gold below $1,200 again,” Fulp said. “We’ve had two, three tests of below $1,200 and it hasn’t lasted.”
His view of 2014 and the price of gold is not overly bullish. “Basically what I envision happening: There’s still lots of commercial shorts in the market and they will use that opportunity to drive down the price of gold again. Then we’re likely to see a short squeeze and it will come back up again. It’s a pattern that I see time and time again. I really think that gold is being run by the puppeteers at the Fed and the fact they can move the gold price up or down in conjunction with the big banks. And it gives them a short opportunity.”
He doesn’t rule out $1,000-an-ounce gold this year, and if the price of gold dips like that he expects more strong ETF gold sales.
A day earlier, on Monday, I took in Dundee Capital’s Chief Economist Martin Murenbeeld’s luncheon talk on the price of gold at the Roundup conference. This was another not overly bullish outlook on the price of gold for 2014. Not entirely depressing stuff, price wise, but not exciting stuff either.
Murenbeeld was introduced as a Berkeley PhD economist from the early 1970s. The MC’s joke was that he wouldn’t ask what other activities Murenbeeld got into at Berkeley during those heady years known for drug abuse. Murenbeeld was quick on his opening, taking, in jest, a Clintonism.
“I can assure you I did not inhale, otherwise I could not do what I do,” Murenbeeld said.
Murenbeeld’s basic premise on the price of gold, rendered down, is that it has not hit bubble territory – e.g. it is up ~6x in a decade versus classic bubbles like tech stock that hit 16x or so back in the late 1990s – and that it is currently in a mid-cycle correction. It’s current price is pretty average in historical context, he said. He also suggested it was oversold last year by fund managers who might have “got buffaloed.”
“Bit of a stambede,” he said to describe the ETF gold exit of some 860 tonnes gold.
Of gold headwinds Fed tapering factored large against its price for Murenbeeld, as they do for Fulp and many other gold observers. To this category – on gold bearishness – Murenbeeld also added, among other things, the prospect of central bank gold sales in Europe – given some countries with high debt like Italy have no recourse to print money – and sluggish global growth, which equates with low inflation.
On the other hand Murenbeeld pointed to strong Chinese phsyical demand. In the midst of ETF gold sales last year he noted “Thankfully the Chinese stepped up to the plate.” If the Chinese hadn’t the price of gold might have taken a much more severe hit. This year, though, he didn’t see ETF gold sales making an impact. He also suspects the US dollar is overly strong and generally saw central bank gold buying as remaining intact. Both bullish points for gold.
Thus – pulled between various opposing forces which he describes in a recent issue of his Gold Monitor – Murenbeeld’s core prediction on the price of gold – weighted between various scenarios – was pretty even: $1,245 an ounce in 2014. In his more bearish outlook he pointed to $1,000 an ounce gold while in his bullish scenario, he saw a couple hundred dollars or so over his average prediction as possible.
Indeed he thought if there was to be surprise in 2014 it would be on the upside to his $1,245 an ounce gold forecast. “I hope I’m wrong,” Murenbeeld said.