Tom Szabo: The Peerless Way To Precious Metal Profits

Source: Brian Sylvester of The Gold Report (10/14/13)

Tom Szabo, an investment strategist and principal of MetalAugmentor.com, does not believe that you can judge all gold companies the same. Szabo uses the Peerless concept to rank companies qualitatively, but dynamically as their circumstances change. In this interview with The Gold Report, Szabo discusses explorers, developers and producers that he believes are one of a kind.

The Gold Report: In a July research report, you wrote that the ongoing decline from the all-time high in the gold price may represent a correction of the last large up leg, which some say began in 2009 or mid-2008. Or it may represent a correction of the entire 1999-2011 advance in the gold price. Which is it? And has that correction run its course?

Tom Szabo: We are in a correction of the 2008-2011 rally and it is ongoing. Big picture, the gold price needs to drop below $1,155/ounce ($1,155/oz) and then subsequently below $1,067/oz before this would represent a correction of the entire gold cycle that goes back to 1999. We haven't seen such a decline at this point so we can't conclude that it's a larger correction.

TGR: We've seen modest upward momentum in the gold price since the lows of April. Is there enough momentum to invest in gold equities?

TS: There are smaller cycles within a correction. So long as investors select the right gold equities they can do well. A lot of projects are viable at this gold price. A lot of discoveries are going to become mines at this gold price.

TGR: What's your near- and midterm forecast for gold and silver?

TS: I suspect we will see a secondary low for gold, perhaps near the low that we reached this past summer, before this entire corrective wave is over. Potential lows are $1,155/oz and $1,067/oz. Longer term, about three years or less, I suspect that gold will again challenge its 2011 high.

TGR: Is silver going to follow suit?

TS: Silver will follow gold, especially during the initial phase of a rally. As a rally progresses, silver has the distinct ability to overshoot expectations. I easily see it exceeding $50/oz and spiking to a $70-80/oz level before settling to a low in the $30-40/oz range.

TGR: What is the sweet spot right now: explorers, developers or producers?

TS: In this market, it has to be about growth, which is a concept that can be applied to all of those categories. Explorers make discoveries and grow the resource. Developers grow by taking a project into operation. Producers grow by adding capacity, upgrading or bringing additional projects into development.

TGR: MetalAugmentor.com uses the Peerless system to rank the quality of companies. How does that system work?

TS: The Peerless system is a subjective determination that is based on quality. We consider the factors that point to the success of an enterprise. Success can be measured in different ways and means different things depending on the development stage of a company and its projects. We use different criteria for an explorer versus a producer versus a developer.

It is also a binary rating where a company is either peerless or not. We don't rank a level of peerlessness, although we do keep track of potential peerless candidates that don't quite have all of the pieces together yet.