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European Debt Crisis Key To Gold Rally; Uncertainty Will Lead To A Positive Climate For Gold, Says Resources Analyst At Goldman Sachs

67 WALL STREET, New York - December 19, 2011 - The Wall Street Transcript has just published its Gold and Precious Metals Report offering a timely review of the sector to serious investors and industry executives. This Gold and Precious Metals Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Investment and Central Bank Demand - Dividends Dependent on Gold Prices - Gold Producers vs. Gold ETF - Midcap and Small-Cap Consolidation Activity

Companies include: Endeavour Silver (EXK); Alacer (ASR.TO); Apogee Silver (APE.V); Barrick (ABX) and many more.

In the following brief excerpt from the Gold and Precious Metals Report , interviewees discuss the outlook for the sector and for investors.

Ian M. Preston is a Resources Analyst for Goldman Sachs' global investment research in Australia and New Zealand. He joined JBWere in 2000 as a Research Analyst covering the gold sector and added coverage of midcap base metal companies later that year. In 2004, Mr. Preston assumed responsibility for covering emerging small- and mid-cap mining companies. He was named Managing Director in 2010. Prior to joining the firm, Mr. Preston was a resource Specialist, working on both the buy and sell sides of the financial services industry in Johannesburg and Brisbane. Following graduate school, he spent four years involved in the analysis and implementation of new mining projects in diverse metals. Earlier in his career, Mr. Preston worked on copper and gold mines in an operational and management capacity for six years. Mr. Preston earned a degree in mining engineering from the University of the Witwatersrand in Johannesburg in 1974 and an MBA from the University of Cape Town in 1980. He is a Registered Professional Engineer is South Africa and an accredited Member of the Securities and Derivatives Industry Association.

TWST: Some people are looking for a rally in gold. Is that what we're going to see from here?

Mr. Preston: Look, I think the gold price is going to fluctuate really around sentiment in Europe, firstly. And then that I think flows into the U.S. dollar, euro and other currencies, depending on moves in exchange rates. I think if we continue to have a period of uncertainty around the debt crisis in Europe, then gold will do well in that sort of a climate. And every time people think that there is going to be some resolution, we start to see a little bit of strengthening in currencies, the appeal of gold dissipates a little bit. And in particular, as you get people moving into the U.S. dollar as the best of the best in terms of fiat currencies, that is always a little bit negative on gold. But broadly I think gold - that there are more positives for gold than there are negatives. And in particular, the fact that central banks are buyers of gold now, individuals are voting with their feet buying gold. So I think that tells you that people are still concerned about preservation of wealth.

TWST: Is that the driving force for many people at this point?

Mr. Preston: I think, absolutely. I think if you live in Europe or you live in the U.S., I mean you've had some pretty tough times over at least the last five years, maybe a decade, whereas if you live in the lucky country, Australia, they have seen property values in Australia continue to appreciate. I mean, they might be coming off a little bit now, but you haven't had the same fear of losing your wealth that you've had in some of the major developed economies of the world.

TWST: And is that why we are seeing the success with ETFs and some of these other new vehicles?

Mr. Preston: In my mind, yes, it is. I think the competition for major gold companies is not between themselves. They have to give a bit of return than what you can achieve just simply having gold in an ETF. Remember the ETF, if its physically backed, you don't have any operational risk, you don't have any political risk, you don't have any fear of governments changing the legislation and the rules of operating.

So if you as an investor are going to invest in a gold equity, you've got to have more than just gold leverage. You've got to be able to not only grow earnings in an improving gold price, but in our view you've also got to give a return to investors, and I think that's why you have seen some of the majors moving now to significantly lift the dividend that they have paid. I mean, historically gold companies have not been significant dividend payers, and in fact have not actually been significant preservers of the equity that's been invested in the companies. Return on equity in many gold companies has been very poor over a very long period of time.

TWST: So what we're seeing is a new management thought process. Is that going to become permanent?

Mr. Preston: It's a very good question. I do think you've had a change, whether or not it becomes permanent, I wish I had that crystal ball, but realistically all of the majors have materially changed the amount of earnings that they are paying out in the form of a dividend. And if you look at some of the majors - say, for example, have Newmont (NEM), where they have linked the dividend to where the prevailing gold prices - I mean, I think that's a clear signal that they want to make it very easy, very transparent for an investor to say, "Well, I have a view of where the gold price is going to be, therefore I can actually calculate what the dividend will be; I'm not subject to the vagaries of management saying 'Well, I'll only pay out a little bit this year.'" And the share price response for Newmont post that announcement has actually been very positive. You've had a similar proposal from Eldorado (EGO), where some of the other majors have just simply lifted their dividends quite significantly. So whether you talk about yield, the lift in the dividend has been very, very significant. I think personally, I think you've got to have at least a 2.5% to 3% level of yield to really make people sit back and say, "yes, this is an alternative to an ETF."

TWST: As you look at this market, is the best behind us or is there still a lot more to go?

Mr. Preston: The gold bulls would say the best is still to come, and the bears would be that we've already seen the best. I think we would probably sit in the camp of saying we would see further upside in the gold price until such time as you start to see real interest rates in the U.S. turning. Now everybody would have a view as to when that really takes - that change takes place. I think that's a very, very difficult question to try and put a timeline on. I think, right now, there are more positives than negatives, an improving U.S. economic environment, and then you can come back and say how dependent is that on the rest of the world that to my mind would be a point when you would start to see U.S. interest rate starting to pick up. I think that would be a signal that perhaps the best might be over for gold, but I don't think we're anyway near that yet.

TWST: Given that, where are you pointing investors? What should they be looking at?

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