Gold prices have certainly been a roller coaster ride over the last few weeks. Tumbling from record highs down to the $1,600 an ounce range, many investors in the sector continue to be puzzled by the metal's recent actions. After all, most of the reasons for investing in the precious metal still exist. Europe and the United States still have their massive debts to deal with; currency debasement is still occurring and high inflation looms on the horizon. With these circumstances still in place, one major gold supporter is telling investors to stay the course and that we'll see higher gold prices soon enough. (For more, see 5 Best Bets For Buying Gold.)

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

A Golden Founding Father
In the gold and silver world, Rob McEwen is as big of a celebrity as Jim Rogers or Eric Sprott. After taking a relatively small $50 million dollar investment in a handful of junior mining firms, he transformed them into the mining powerhouse, Goldcorp (NYSE:GG). With one of the richest gold mine deposits in the world (Red Lake, Ontario) as well as one of the lowest cash costs of any major miner, Goldcorp has emerged as one of the largest and most profitable majors in the sector. So, McEwen certainly knows his way around the gold industry. His latest predictions for precious metals prices are enough to make any gold bug excited.

Speaking to the Geological Society of Nevada, McEwen firmly stood behind his prediction of $5,000 an ounce for gold and $200 an ounce for silver, within four years. Robert urged investors to think about gold as a source of money and that it is a currency. To that end, central banks in China, Russia and India are buying gold in spades as a way to diversify their reserves and restore confidence in their currencies. The mining guru believes that the Chinese and Russians will eventually increase their gold holdings to the level that the percentage of their total currency will be greater than that of any other currency in the world. At this time, they will assert that their currency should become the reserve currency of the world. With this immense buying going on, coupled with the difficulties in finding new supplies of gold, McEwen sees gold surging in price over the next four years and could see prices spikes above $5,000 if conditions are right.

Playing McEwen's Bullish Forecast
For investors, McEwen's bullish long-term forecast for gold prices is certainly appealing and with gold trending downwards lately, it could be a good time to strike. While McEwen agrees that physically backed gold ETFs, like the ETFS Physical Swiss Gold Shares (ARCA:SGOL) have their appeal, he prefers the mining firms. His fondness drifts especially towards the junior miners with their "potential to explode to the upside if they are lucky." The Market Vectors Junior Gold Miners ETF (ARCA:GDXJ) is still the easiest way to gain exposure to a basket of these firms and has fallen hard over the last few weeks. Similarly, the Global X Gold Explorers ETF (ARCA:GLDX) can be used to bet on the smallest of gold mining firms. (For related reading, see The 5 Best Performing Gold ETFs.)

For those investors willing to bet directly on McEwen's potential success at creating the next Goldcorp, U.S. Gold (NYSE:UXG) could be the answer. He also holds 20% of the shares in the firm as well as owning 30% of the shares of Minera Andes Inc. (OTCBB:MNEAF.OB) and plans on merging the two in order to form a new company called McEwen Mining. The combined company would have zero net debt and large copper, silver and gold reserves and would be on the S&P 500 Index by 2015. The only other gold firm included in the index is Newmont Mining (NYSE:NEM). Additionally, investors looking at other gold juniors may want to consider Rubicon Minerals (AMEX:RBY). McEwen sold his stake in the firm to focus on the merger plans, but the firm's outlook still remains the same.

The Bottom Line
Rob McEwen is slouch when it comes to the gold industry and his latest forecast is enough to get the blood of any gold bugs pumping. For investors, the recent downturn in gold prices is a great buying opportunity to add gold equities in the wake of his $5,000 an ounce prediction.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  2. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  3. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  4. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  5. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  6. Mutual Funds & ETFs

    Buying Vanguard Mutual Funds Vs. ETFs

    Learn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
  7. Mutual Funds & ETFs

    ETFs Vs. Mutual Funds: Choosing For Your Retirement

    Learn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
  8. Mutual Funds & ETFs

    How to Reinvest Dividends from ETFs

    Learn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
  9. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  10. Mutual Funds & ETFs

    Best 3 Vanguard Funds that Track the Top 500 Companies

    Discover the three Vanguard funds tracking the S&P 500 Index, and learn about the characteristics and historical statistics of these funds.
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>

You May Also Like

Trading Center