john embry expects to see gold at $1500 by the end of the year. but then again, he expects that every year:

TGR: When the market brakes again, will it be different from last fall?

JE: That perfect storm of negativity will not happen again. That was about as bad as it gets. I had an interesting anecdotal experience last week. I saw a wealthy acquaintance for the first time since the depths of the market decline. At that point, he was morose. Now he's absolutely ebullient, thinking the higher market is just great, nothing but blue skies ahead. I think that's a bit of a theme out there. Later that same day, I ran into a good friend, one of the better proprietary traders in Canada. He was making the same points that I am. He thinks this summer is going to be extremely ugly and that the public has it all wrong. Before long, we will see who's right.

TGR: So it could get ugly but you think not quite as ugly as last fall?

JE: Not that ugly. In terms of gold and gold shares, particularly, that was the cleanout that got rid of everybody who didn't really know the reason for owning them in the first place. I'd never seen anything like it, to be quite honest. I was dumbfounded. The fundamentals hadn't changed much, but perceptions did. And people threw the baby out with the bathwater.

I actually bought a lot of gold at that point. I bought some shares, too, and already have a couple of five-baggers.

TGR: What would you advise investors who are just coming into the gold market?

JE: I was responding to a questionnaire recently about how to construct a gold portfolio in today's market. If you're being relatively conservative, you would always have a solid core in bullion. I don't mean ETFs. I mean real bullion or a vehicle where you can audit the fact that the gold is there and not just trust someone saying that it is.

TGR: How much would you put in that core holding?

JE: Physical gold would be 20% to 25% of my portfolio. But for the equities, as I indicated, I would not focus on the majors where everybody huddles and prices are too high. Instead, I would tilt my stock positions—the major weight of my stock portfolio—toward those small producers and explorers with legitimate projects that are reasonably advanced. Getting into the really junior explorers, you'd have to know the company to make sure you have a real asset to take advantage of the rising gold price.

TGR: So would you put maybe 50% of your gold investment in those smaller producers?

JE: Yes, small producers and advanced exploration vehicles. I'd put another 25% for the sake of stock liquidity into some of the big ones.

TGR: But you see the real opportunities in the smaller stocks because that's where you get the leverage?

JE: You get huge leverage and, right now, the public isn't there in any big way. We've seen some strength recently, but nothing compared to what will happen if gold makes a clean breakout through $1,000 and really starts moving—which I think will happen. At that point, investors will want exposure and, quite frankly, the whole sector's market cap is so puny that it won't take much to really drive these stocks north. I'm quite convinced that there will be numerous 5- and-10 baggers over the next few years.

TGR: Even after the run-up they've had already?

JE: They're barely back to where they were a year ago. The big surprise is the degree to which they fell. And there's one other thing. What does $950 gold mean for gold equities? Believe it or not, $950 isn't a good price for the economics of gold mining. There's been a lot of smoke and mirrors about the economics of this industry. The fact is that it's still very expensive to mine and that is why gold mining production has been falling steadily now for three or four years.

I think it's going to take dramatically higher prices to lead to expansion of gold mining output, and when higher prices are realized, it will take years to achieve the actual higher output.

http://news.goldseek.com/GoldSeek/12...