Lawrence Lepard, founder of Equity Management Associates and a long-time gold bull, expressed surprise at the rapid and strong breakout in gold prices during a recent interview with Kitco Mining. He attributes this trend to various macroeconomic factors, including increased demand from Asia and central banks, U.S. fiscal irresponsibility, rising deficits, and expectations of monetary debasement.
Lepard argues that the bullish trend in gold is driven by growing global awareness of the U.S. being “fiscally trapped,” which he believes will lead to continued inflation and a weakening U.S. dollar. He predicts this will further bolster gold prices in the coming years, stating, “I think people who [believe] the gold price will be $2,050 or $2,100 in four or five years…are delusional,” implying a much higher price target.
Despite gold’s rise, mining stocks have not kept pace, reflecting market skepticism about the sustainability of these price increases. Lepard anticipates a rotation into mining stocks when other sectors of the stock market begin to falter. He explains, “The very best gold stock bull markets take place when the other markets aren’t working,” and predicts that the broader stock market may face difficulties in the next year or two as the economy slows down.
Lepard is also highly optimistic about silver, citing both monetary and industrial demand as driving factors. He notes, “If you look at silver on a technical basis, you can see this enormous cup with a handle and we’re right on the cusp of breaking out.” He predicts silver prices will surpass $50 per ounce and potentially reach $75 to $100 in the next few years.
Given that silver miners’ all-in sustaining costs range from $12 to $22 per ounce, Lepard anticipates substantial profit margins at higher silver prices. He suggests that many silver mining companies could see their valuations increase tenfold or more, stating, “You’re going to have a large number of silver companies that do 10 baggers or more.” Reflecting this bullish outlook, Lepard confirms that his portfolio is overweight in silver investments.