EDITOR’S NOTE Good times

Things haven’t looked this good for Canadian gold miners in years. Prices are up and it looks like South African production is down. Although we may have slipped to fourth place among gold producing nations — the U.S. has supplanted us in third place — our mine production of gold in 1987 will be more than 130 tons. That’s higher than it has been since the 1940s and about double what it was in 1982. Increased production and higher prices are a winning combination by any standard. What’s more, the strong gold price doesn’t appear to hinge on other people’s woes. Gold investors are often admonished for relishing problems elsewhere in the world. The misfortunes of others, it seems, often puts upward pressure on gold prices. Inflation, currency crises, racial problems in South Africa or military escalation in the Middle East are all considered bullish for gold. It’s easy to picture the “gold bugs” rubbing their hands in glee at the prospect of an imminent Third World War.

That’s not the case in this bull market. The driving force seems to be a matter of cash-rich investors looking to spread their bets outside of standard debt and equity vehicles. As Shearson Lehman points out in its 1987 annual review of the world gold industry, a mere half percentage point shift of capitalization from the world’s stock markets to gold in mid-1986 would have been enough to soak up the entire investment purchases of gold by the private sector between 1975 and 1985.

There’s a lot of money out there, and gold investments are increasingly seen as a comparatively secure place to put it. The Canadian gold mining industry is doubly benefitting: its markets are expanding and its source of equity financing is growing, too, as more international investors want to own a piece of the gold producers in this politically stable country. It’s not surprising, then, that some 23 Canadian gold projects have been given the production go-ahead.

Gold booms, as we all know by now, don’t last forever, and there inevitably will be a downturn in this cycle. We’re not about to predict when that will be, though, and until it does happen … let the good times roll. editor

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