Investors flock to gold, precious metals amid uncertainty

Chris Taylor, CEO of Great Bear Resources, discusses where gold prices may go next with Yahoo Finance’s Alexis Christoforous, Brian Sozzi and Jared Blikre.

Video Transcript

BRIAN SOZZI: In a year of ongoing financial uncertainty, gold has been on a tear. Precious metal is up around 19% since the beginning of the year. Some predictions have prices doubling, doubling within three years. Joining us now is Chris Taylor, CEO and president of Great Bear Resources. Chris, good to see you this morning. Listen, the pandemic, it's not going anywhere anytime soon. It's just going to be here. And given that, what's the longer term outlook for gold?

CHRIS TAYLOR: Gold is one of these commodities which provides financial stability in times of uncertainty. And I can't see uncertainty diminishing at any point in the near future. So I think there is consensus in the industry, now that we have a really good pathway for us-- for gold to increase in value over the next year or more.

ALEXIS CHRISTOFOROUS: What about that other precious metal that doesn't get as much attention? And that would be silver. It's up an incredible 60% since March. Do you see silver moving higher?

CHRIS TAYLOR: Yeah, Alexis. Silver is trading historically at a discount to its usual level with gold. And that means that over the long term, silver plays are another place investors can go to if they want to see that extra leverage that can occur when you have a strong precious metals market.

BRIAN SOZZI: Chris, do you think when you note that gold prices could head higher, do you think they could double? Are we talking $4,000 an ounce within three to five years?

CHRIS TAYLOR: You know, I hear consensus-- I hear consensus that we're going to see gold prices above $2,000 an ounce. If gold got to about $4,000 an ounce, I think that would probably be the kind of world where people were walking around with guns on their hips. And it's not the sort of thing that I'd really want to see.

ALEXIS CHRISTOFOROUS: All right, what about-- I'm going to ask you another one outside of gold, and that's copper-- also been on a tear recently, hitting its highest level since April of 2019. What's buttressing the price of copper here, and do you think that that's sustainable?

CHRIS TAYLOR: The copper price appreciation-- I used to work in a number of copper mines, actually. And it's one of these commodities now which has a couple of strong tailwinds behind it. One of them is the anticipation that there'll be more economic stimulus that'll lead to infrastructure development. I think you've seen that politically in the US recently. The other one is the long term shift to electric vehicles. And those are both bullish tailwinds for copper. So I can see copper prices appreciating steadily here over the next number of years.

JARED BLIKRE: Jared Blikre. I want to take your-- pick you're mind about China as it relates to gold. Because there's been this virtuous cycle where the reopening has gone pretty well. They have a strong retail demand for it there. And we've also seen the US dollar slide with respect to the Yuan. How much of a factor is that, and is it a necessary tailwind?

CHRIS TAYLOR: China is always-- it's sort of the wild card in the room when it comes to gold demand. Now there's been steady buying by the Central Bank in China of physical gold, so that's a strong point of demand. There's also a saving culture in China where they are attracted generally to safe commodities. So that's more savings in the bank, and the purchase of physical gold. So trade considerations aside, economic considerations aside, China's always a point of demand. With what we're seeing at the global economy right now, I think that that uncertainty with the US and China relationship is going to be a driver for precious metal prices for some time.

BRIAN SOZZI: What are some of the best stocks, individual stocks or ETFs, to play gold? Because you have a lot of people out there trading-- they have one bedroom apartments. So they're not going out and stuffing that one bedrooms with gold bars.

CHRIS TAYLOR: Yeah that's a really good point. I think you know it's hard to go wrong in the gold space, provided you're investing in a company that's looking at tangible results, that are generating good results in the gold space. These are either the financial results of the main producers-- they're going to be very strong, unlike about 10 years ago, when we had the last bull market in precious metals, the gold producers have very strong balance sheets and they've used the doldrum-- the lean years-- to become efficient producers.

But if you want leverage in the gold space, some of the best places to look are companies like mine, Great Bear. These are the legitimate discoveries, because we've generated for our shareholders over the last three years through gold discovery, something like several thousand percent returns. And there are other major discoveries waiting to be made and the biggest growth comes with companies like ours that are on the top of the major discovery. So do your homework, and look for those opportunities.

JARED BLIKRE: What's your take on the leasing effect whereby certain companies will lease or purchase the right to buy gold off of a producer or a miner at a reduced price in the future? I've seen an uptick in that-- those kind of companies lately. Do recommend them as investments?

CHRIS TAYLOR: I think there are alternative mechanisms to invest in gold. These typically consist of streaming entities and Royalty companies. These are good, and they tend to be stable cash flow streams. One of the drawbacks of investing in these now is the fact that these companies are trading at massive multiples over their earnings. So I think that the market has probably fully priced that in. And I think if you want to achieve that additional leverage you probably want to be looking at the individual gold equities, particularly the producers and the new discovery companies, the junior gold companies that are sitting on top of major discoveries.

ALEXIS CHRISTOFOROUS: Chris, you know we don't usually see equities rising in tandem with precious metals, particularly gold. We've been seeing that now for quite a while. Should we be reading anything into that? What does that tell you about investor psyche when you see that?

CHRIS TAYLOR: I think I began to see this over a year ago now when I was in New York. I'm in New York frequently for business-- or I was, anyway. I have to use the past tense these days. So what I began to see was that initiation of a generalist move. And these are investors that are not specifically interested in precious metals, but are just chasing returns. They began to be interested in the precious metals space for the first time in more than 10 years about a year ago.

And I think what you're beginning to see now is a recognition that fundamentals are strong in the industry, and the economy is not going to resolve itself in any kind of meaningful way for the next number of years. So now there's recognition that you have to look at alternative trades to the usual successful trades that you've seen in the tech industry and others, and you have to be looking at the precious metal space again.

JARED BLIKRE: I just want to follow up on that point, because very important I think-- a lot of parallels between now and 2009, another period where we saw stocks and gold rise in price. And that continued for a couple of years. But really the top was I think when retail investors came in, they started bidding up coin prices. Not really seeing that with-- not really seeing that effect too much right now. But what's your take on the coin market?

CHRIS TAYLOR: The specific like-- are you talking about Crypto? Or are you talking about--

JARED BLIKRE: Oh, no. I was talking about gold coins. At the top in gold was concurrent with people-- the retail investor rushing into the coin space.

CHRIS TAYLOR: Yeah, the coins are-- I mean this is as close as you can get to a physical, tangible, store of gold wealth, is to buy it and stick it in a vault somewhere. Certainly there is an element of that, particularly some of the retail investors that I know of. But you're never going to be able to physically allocate enough gold to cover your needs or with enough flexibility. Certainly it can be a component of an investment portfolio, but there are other ways to really get exposure to gold.

And I think that's where the equity interest comes in. And we're not there in the broad market yet, but it's something that's going to materialize over time, is that generalist move into the gold space. And really the best exposure is equities.

BRIAN SOZZI: All right. Chris Taylor, CEO and president of Great Bear Resources. Good to see you. Have a great weekend.