Jim Sinclair’s Commentary

I would suggest the key comment in the Dow Jones story below is the lack of new reserves which inherently says how important the juniors are.

"We are simply not finding any new reserves anywhere in the world," Jacobsz said at a New York Society of Security Analysts metals and mining conference. Further, deposits where gold can be relatively easily extracted are being tapped out, he said.

DJ Inflation, Economy, Waning Supply To Support Gold - Producers

NEW YORK (Dow Jones)–Declining supply and investor demand driven by economic uncertainty and future inflation are likely to keep gold prices high, mining company officials said Tuesday. "Our view is that the gold market is in probably one of its most promising phases," said Willie Jacobsz, head of investor relations with Gold Fields Ltd. (GFI).

He cited economic uncertainty around the world, future inflation and "a very real decline in global mine supply" as cause for his company’s optimism on the gold price.

"We are simply not finding any new reserves anywhere in the world," Jacobsz said at a New York Society of Security Analysts metals and mining conference. Further, deposits where gold can be relatively easily extracted are being tapped out, he said.

Meanwhile, investors have been snapping up the metal as a currency, uncertainty and inflation hedge.

"The current rally in the gold price is driven by investment demand," Jacobsz said. "We don’t see sentiment changing very soon."

Gold prices will remain strong as long as investors keep flocking to the metal, said Victor Flores, senior mining analyst with HSBC.

"There has been a great deal of interest in gold from investors," Flores said. "As long as gold ETF [exchange-traded fund] demand remains robust, you will see gold [prices] hold up." Although deflationary pressures are strong at the moment, higher inflation and weaker currencies will probably assert themselves down the road as results of government stimulus efforts to fight the economic downturn, Flores said.

"At the moment we are fighting deflation," Flores said. "What’s really lurking around the corner is inflation."

Investors historically have bought gold as a hedge against inflation because they see it holding its value more strongly than other assets amid rising prices. It is also bought as a safe-haven in times of political and economic uncertainty.

"Gold is the only asset class that withstood the current economic downturn," said William Biggar, president and chief executive of North American Palladium Ltd. (PAL), which last month completed the acquisition of Cadiscor Resources Inc. and its gold mine in Quebec.

"Our growth strategy is focused on precious metals and acquiring quality gold assets," Biggar said.

-By Matt Whittaker, Dow Jones Newswires; 201-938-5959;
matt.whittaker@dowjones.com