Lawrence Roulston: Every Reason in the World to Believe Gold Will Go Higher

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The Gold Report recently caught up with newsletter writer and analyst Lawrence Roulston of Resource Opportunities, who’s been travelling to learn more about the state of mining worldwide. In this exclusive interview, Roulston provides his thoughts on the outlook for the economy and what factors impact gold and other metal markets. “As the Western world gets back on track,” says Roulston, “commodity prices will continue higher.”

The Gold Report: Lawrence, you have just returned from trips to Dubai, Hong Kong and Europe. What does the rest of the world think of the health of the U.S. and European economies?

Lawrence Roulston: It is striking how different the outlooks are in different parts of the world. In North America, most people are totally focused on the U.S. economy, which is not looking that promising in the near term. Therefore, investors are quite gloomy. Europe is also not very upbeat. But, in Europe, they are more pragmatic and they tend to look a little further into the future. As a result, many European investors see this down period as a buying opportunity. Parts of Asia were hit hard by the slowdown, but there is still a lot of growth in China and India. China reacted quickly with an effective stimulus plan that is focused on building infrastructure. Growth there is forecast at 8% for this year. With enhancements to rail, roads, ports and the like, China will become an even greater economic force.

TGR: What is the Asian perspective on the importance of emerging markets to global economic turnaround?

LR: There is a myth that Asian growth depends mainly on exports to the West. Much of the economic activity in Asia is related to trade within the region. After the credit crisis, there was a severe shortage of export financing, which meant that exports plummeted. Now that financing is available again, activity is recovering throughout the region. Asians are far less concerned about the global situation than they are with what is happening in the region. With China, which is the third-biggest economy in the world, growing at 8%, it doesn’t really matter what happens in other regions. Once upon a time, Asian growth depended on exports to the West. Now, the West will benefit from growth in Asia.

TGR: What do investors in other regions think about precious metals and the U.S. dollar?

LR: Investors are very nervous about the outlook for the dollar, but it remains the global currency. With uncertainty remaining about the U.S. financial system, gold has become more important as a currency hedge, as an inflation hedge. People can see the long-term downtrend in the dollar. As a result, the dollar is seen more as a medium of exchange. It’s held for the short term, by most investors. Of course, the Chinese government holds most of its $2 trillion dollars worth of foreign currency reserves in dollars. There is growing nervousness about that huge exposure and moves away. In part, the government is buying commodities.

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