By Thom Calandra, CBS.MarketWatch.com Last Update: 11:53 AM ET Aug. 27, 2002
SAN FRANCISCO (CBS.MW) -- The late 1990s rush into technology stocks sparked record-high attendance at investment conferences.
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The tech boom also rewarded big, albeit fleeting, profits to those who showed to listen to frantic, sometimes addled presentations of top executives like WorldCom's Bernie Ebbers and Gemstar's Henry Yuen.
The heirs apparent in a new age of hard assets and old-line companies are those gatherings devoted to precious metals and alternative investment strategies. Organizers say they expect standing-room-only turnouts for a number of gold-related conferences this autumn.
The theme of these gatherings, which are populated by a loyal band of mining executives, newsletter writers and natural resources analysts, is us vs. them. "We no longer live in a world where investments can be made in sound securities," says James Sinclair, chair and chief executive of small Tan Range Exploration Co. (CA:TNX: news, chart, profile), which trades in Canada. "We live in a world that has transformed everything financial into a grand casino, which we are all gone crazy enough to consider normal."
Sinclair and others who will be speaking at the New York gold show in September are of the belief that there is a wide gap between the currency of corporate America (them) and the currency of the precious metals markets (us). "As long as stock markets move hundreds of points in an hour up, down and sideways, the ordinary person should keep their hard earned money in cash -- in a mayonnaise jar preferably," says Sinclair, who has worked as a miner a metals trader or a mining executive for 43 years.
"Folks are disappointed with the system and don't know what to do about it," says Bob Chapman, editor of The International Forecaster newsletter and a frequent speaker at metals conferences.
The New York Institutional Gold Conference, one of the first of the autumn season, is designed for ordinary folks looking for insight into the dusty world of metals miners. The surge in respect for gold comes amid a 2002 performance that has the precious metal's spot price up 14 percent -- better than stocks, most bonds and interest-bearing cash accounts.
Main Street folks, to be sure, are getting burned by gold mining stocks, just as they have with tech stocks. The bullion group's 100 percent-plus equity gains this year eroded in June, leaving many individuals with a loss. Gold mining executives, meanwhile, took this rare opportunity to unload some of their companies' soaring shares, risking shareholder heat.
Still, individuals, having suffered some $7 trillion of lost stock-market wealth since January 2000, are searching for an antidote to the conventional brokerage advice of buying-and-holding America's largest companies.
"Gold remains far off the radar screens of most investors," says Bob Bishop, editor of one of the oldest dedicated mining newsletters, Gold Mining Stock Report. "Higher prices and developments that will make it easier to own gold will raise gold's profile and also help to raise the price."
Bishop and others point to efforts by the World Gold Council's new leadership, which includes Gold Fields (GFI: news, chart, profile) non-executive chairman Chris Thompson. "The World Gold Council is in some disarray, but if anyone can turn it around, Chris Thompson is the right person for the job."
Thompson, the embattled World Gold Council's chairman, and the trade group's new chief executive, former California Public Employees Retirement System head James Burton, are developing a security that -- if it clears numerous regulatory and market-making hurdles -- could act as a real-time proxy for gold.
Whether a new, exchange-traded instrument for trading physical gold at spot prices will woo ordinary investors is a subject of some debate. "I doubt it would fly very far on the broader retail basis because the small crowd of gold bugs that might trade it tend to view derivatives as the product of the devil," says Ian McAvity, director and a co-founder of a closed-end fund that acts as a proxy for gold and silver, Central Fund of Canada (CEF: news, chart, profile) (CEF: news, chart, profile).
McAvity, another popular figure at gold conferences, acknowledges an exchange-traded fund that represents gold could compete with Central Fund. "With 20 years under our belt in Central Fund, I've seen a wide range of ideas come and go, and look forward to seeing what the competition designs and how they sell it," he says..
There is no denying such a gold security, following on the heels of exchange-traded bond funds and popular index funds such as the S&P 500's SPY(SPY: news, chart, profile) (SPY: news, chart, profile) Spyder Trust, would turn heads. Gold aficionados long have complained how difficult it is to buy physical gold in the United States, without resorting to leveraged futures contracts or shifty gold dealers.
"A major problem for many U.S. investors seeking alternatives is that many of the less reputable coin dealers use cheap offers on small lots of Gold Eagles as a loss-leader to get the customer on their books, and very shortly afterwards start churning up to ever more exotic numismatics," says McAvity, who lives in Toronto.
They churn, we burn
Churning, as Americans have come to learn, is a practice common in all financial markets, including the market for gold mining shares big and small. "Gold and silver and particularly the shares have been very volatile, and that has scared buyers off," says International Forecaster's Chapman. "Less than 1 percent of Americans own gold and silver coins -- and bullion and that is very bullish. That leaves 99 percent as possible buyers."
Adrian Day, another longtime gold investor and president of Global Strategic Management in Maryland, says American investors are puzzled by gold's gyrations this summer. The metal has actually lost ground during the horrific summer season for the U.S. stock market. On Tuesday morning, spot gold's price was $312.50 an ounce, up $1.50.
"More and more investors seem to be buying into the arguments that the markets are managed," says Day, reflecting growing reports that New York City banks are using derivatives to deflate gold prices. "Whereas two years ago, this was very much a fringe argument, it is now more widely acknowledged as a valid possibility."
Mary Anne and Pamela Aden, sisters and editors of the Costa-Rica-based The Aden Forecast, are confident the gold sector will outpace other investments this year. With that performance will come greater respect for the metal.
"Since gold has been down to dull for most of the past 20 years while stocks were all the rage, most investors don't know much about it," the sisters told me in a joint e-mail. "But they have seen gold and gold mutual funds outperform all other investments this year. If this continues, it'll attract more attention."
Sinclair, the grizzled head of Tan Range, says Joe Q. Public will sit up and take notice when gold prices make their next move higher. "I would tell Joe Public that if he sees gold close above $330 and then above $354, he should do everything to set his financial houses in order," Sinclair says. "It means there are serious problems on the horizon well beyond the decline in the stock market and gas costing more. Volatility in the equity markets means Stay Away."
The New York gold show, free to Joe Q. Public, will bring together Sinclair, the Aden Sisters, Bishop, Day, McAvity and scores of newsletter editors, mining executives and gold mutual fund managers. These include John Hathaway of Tocqueville Gold Fund (TGLDX: news, chart, profile), John C. Doody of Gold Stock Analyst and Rick Rule of Global Resource Investments. The keynote speaker will be James Grant, editor of Grant's Interest Rate Observer.
See the New York Institutional Gold Conference for more information.