Rob McEwen: Only A Matter Of Time Before 'A Tidal Wave Of Money' Flows Into Miners, Gold
Editor's Note: View Kitco News' full 2018 outlook coverage
(Kitco News)- After what has been described as a frustrating 2017,sentiment in the precious metals mining space is improving and is expected tobuild throughout 2018, according to Kitco News’ top mining CEO of 2017.
In an interview with Kitco News, before the results of surveywere calculated, Rob McEwen, CEO of McEwen Mining (NYSE: MUX, TSX: MUX) said that he is optimisticabout gold prices and the mining sector for 2018. He said he expects the sectorto benefit as the U.S. dollar continues its overall downward trend and equitymarkets fall from their record valuations.
However, McEwen noted that 2018 is not going to see astraight shot higher and that investors will have to deal with periods ofvolatility. He said that he could see a stronger U.S. dollar in the firstquarter of the year as markets react positively to tax reform, which Congresspassed in the 11th hour of 2017. He added that the U.S. dollar is likely to weaken later inthe year as concerns over U.S. growing deficit start to build. The new taxlegislation is expected to add $1.4 billion within 10 years.
“Gold priced in U.S. dollar terms is going to be the biggestfactor for the mining sector in 2018,” he said. “Gold priced in other majorcurrencies are near their all-time highs, so I think it’s only a matter of timebefore we see a big run-up in gold against the U.S. dollar.”
But, gold’s potential is not just dependent on a weaker U.S.dollar. McEwen said that it’s only a matter of time before investors jump backinto the mining sector as they search for value in an overvalued marketplace.
“If you compared the Goldman Sachs Commodity Index to theS&P 500, commodity prices are at their lowest point since 1971,” he said.“On a risk/reward basis, there is not much more left on the downside and lotsof potential on the upside.”
McEwen noted that it wouldn’t take much to drive the miningsector higher. For example, he said that if fund managers increased theirmining exposure by 1%, it would equal to a 10-fold increase for the industry.
“Markets are being driven more and more by passiveinvestment managers who are using index funds, so when the swing comes there isa tidal wave of money that could come into the mining space,” he said.
While many investors are reveling in last year’s 20% equityrally, McEwen said that it is unlikely they will see those kinds of gainsagain, which could lead more people to diversify into ignored sectors.
“People are going to start asking themselves if they shouldstart to take money out and put it into cheaper assets that will help them outduring a correction,” he said.
McEwen, according to votes from Kitco readers, was the topmining CEO of the year for 2017. This is the second year he has earned thetitle.
The Votes Are In! Find Out Who Won Kitco's #Mining CEO Of The Year Survey? | #Decrypting2018 | https://t.co/KYvIbPtU3v pic.twitter.com/UOAKT8O62S
— Kitco NEWS (@KitcoNewsNOW) January 8, 2018By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.