Patience is the key to a golden future for both investors and miners. Thomas Drolet of Drolet & Associates Energy Services Inc. is an energy expert who is also an avid gold investor. He typically visits the mines in which he has a stake and talks turkey to managers. He has found a sweet spot for gold in his basic portfolio—and he shares a few of his favorites with The Gold Report.
Thomas Drolet is the principal of Drolet & Associates Energy Services Inc. He has had a 44-year career in many phases of energy—nuclear, coal, natural gas, geothermal and distributed generation, with expertise in commercial aspects, research and development, engineering, operations and consulting. He earned a bachelor's degree in chemical engineering from Royal Military College of Canada, a Master of Science degree in nuclear technology/chemical engineering and a DIC from Imperial College, University of London, England. He spent 26 years with North America's largest nuclear utility, Ontario Hydro, in various nuclear engineering, research and operations functions.
The Gold Report: Why is the price of gold stuck?
Thomas Drolet: The central banks of the world are fighting gold in order to save their fiat currencies, so there is a fight to the bottom, and gold suffers. I surmise that the U.S. dollar will continue to dominate world currencies for the next decade. That makes gold produced outside of the U.S. in some of the safer jurisdictions a very valuable investment going forward. And it also helps domestic production for the obvious reason of predictable laws and regulations at home.
TGR: When you talk about the U.S. dollar being dominant for the next decade, what do you base that prediction on?
TD: The Chinese and the Russians are talking about trading oil and gas, mining and building pipelines within the yuan and the ruble currency axis, bypassing or ignoring U.S. dollars for normal worldwide fossil commodity trades. That will gradually lead to less use of the U.S. dollar, globally. Those U.S. dollars will stay home, creating a shortage of available U.S. dollars for the rest of the world. That will keep the U.S. dollar high.
Our markets are doing better than other export markets. China is looking inward, trying to supply its domestic markets via internal sources. That means less use of U.S. dollars by the Chinese, and less accumulation of U.S. dollars worldwide, which adds to the shortage of U.S. dollars in the market. Now that quantitative easing is over in the United States, that will mean the Federal Reserve will stop printing money, which is a sign that the supply of U.S. dollars is turning a corner. As interest rates rise, investors will return to buying shares in the U.S. and Canadian gold miners.
TDR: Who is positioned to benefit from that resurgence in gold investing?
TD: I am very high on Nevada and the Carlin Trend of gold mines operated by juniors such as Terraco Gold Corp. and Rye Patch Gold Corp. Barrick Gold Corp. and Coeur Mining Inc. are also doing really well in the Nevada gold fields. Terraco, by the way, has a nice royalty position in a property that is being developed there by Midway Gold Corp. and Barrick Gold.