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Louis James: 'Gold is Trading Like a Commodity'

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Published on Aug 10, 2015

At the recent Sprott-Stansberry Vancouver Natural Resource Symposium, the Investing News Network had the chance to speak with Louis James, chief investment strategist at Casey Research. He gave his take on the gold market in general, his favorite gold stocks and why, despite the fact that he's bullish on gold, he believes diversification is important.

To start off, James explained that while in the past he's described gold as a "fear barometer," recently the yellow metal "has decoupled from that — it should be the fear barometer, and ultimately I think it is, but so far this year it has been trading more like any other commodity." Of course, those other commodities have been "in a slump, moving almost lockstep."

He isn't sure exactly what will push gold back to being a fear barometer, but said he suspects it will be "another shock of fear." Until that happens, he encouraged investors to remember that "at the moment gold is trading like a commodity — so watch the commodities markets."

As mentioned, James remains bullish on gold despite the fact that it's been having some difficulties lately. He said the most exciting exploration results he's seen this year came from Reservoir Minerals (TSXV:RMC). "It's been talked about much here — I mean, 84 meters of 10 percent copper and 10 g/t gold. I've never seen a drill hole like that," he said.

Looking at gold stocks more broadly, James highlighted, among other things, the benefits of the prospect generator model. "In the exploration field if you're not a prospect generator using other people's money to defray the risk, [then] you're going to be roadkill. There's just no way to raise money right now for grassroots projects, the market doesn't care — you need other people's money. So the prospect generator model has always made sense, and today we can see why it makes sense," he commented.

Of course, his good outlook on gold doesn't mean he's putting all his eggs in one basket. Indeed, James emphasized that diversification remains important. In particular, he's interested in the tech space, which he sees as similar to the junior mining sector in some ways. "It's a ... high-risk sector, but the dynamics are familiar to me and I like it," he explained.

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