Hans von Michaelis, The Randol Gold Model, Randol International
Hans von Michaelis
Randol International Ltd
Born near Cape Town, South Africa
Education: Ph.D. in Geochemistry from the University of Cape Town in 1969.
Currently divides his time between residences in Golden, Colorado; Tucson, AZ and Johannesburg, South Africa.
1970-1977 Business development experience at three international mining companies including International Resources Ltd. (early market development for Richards Bay heavy minerals); The Hochschild Group and The New Jersey Zinc Company.
1977 – 2000 Randol International Ltd., President & owner. Business development services focused on the mining & mineral processing industries. Completed several multi-client studies on innovative technologies for gold, silver and uranium extraction and recovery. Organized numerous conferences on innovative ore processing technologies; for several years also organized conferences on Global Mining Opportunities and Mexico Mining Opportunities. Publisher of mining directories and of a quarterly newspaper Mining Opportunity Bulletin”.
2001-present Randol Interational Ltd., President & owner. Business development services for the mining industry particularly in the gold and silver mining industry. Promoted HPGR for applications “hardrock” ore processing. Major client has been Polysius Corp.
1997 – present: Past and present director of several gold mining companies including Glamis Gold Inc; and Goldgroup Mining Inc. Assisted with business development, strategic planning and financing.. Past clients include National Gold Corp. and Excellon Resources.
One of the founding shareholders of a junior gold exploration company that grew into Alamos Gold Inc. Introduced Mulatos gold deposit to Alamos.
2010 –on Manages a small private mining royalty fund. Author of Randol Gold Model based on Primary Drivers of the Global Economy.
The Randol Gold Model
So far so good – what’s next?
Randol Gold Model provides semi-quantitative insights into the future price of gold, or at least the direction in which the price of gold can be expected to go in the medium term (up to 5-10 years). Generally only fools try to predict the price of gold, because the gold market is influenced by political decisions and politics is highly unpredictable.
Starting fifteen years ago a careful study of mega-trends and macro-cycles, and of historical booms and busts, however, revealed primary drivers of the global economy that are so dominant that the financial, economic and political “mess” the western world is currently experiencing could be predicted as an inevitable outcome.
The US economy is the primary driver of the global economy. The US consumer market is the primary driver of the US economy, and the baby boomer spending wave was the primary driver of the US consumer market until 2001. After that, the baby boomer retirement and retrenchment wave was recognized as having inevitable serious impacts on the US economy.
China’s infrastructure growth is the primary driver of the global energy, ferrous and base metals markets. China’s efficient low cost-manufacturing capability usurped US manufacturing shutting factories and displacing millions of American manufacturing workers
Retired baby boomers need income to live. Consequently mainstream share markets will once again shift from their current focus on capital gains speculation to a world where investor valuations are based on earnings and dividend yield. The new generation will be hard pressed to find the capital needed to purchase the plethora of high priced low-yield “long haul” stocks from the retiring boomer generation. The S+P 500 and Dow Jones indices are likely, therefore, to come down to reflect a shift from speculation to investment based on earnings and dividend yield.
Western world consumer spending has also been seriously impacted by a predictable transition from excessively speculative investor herd mindset and savings drawdown that prevailed up to 2001 along with conspicuous consumption leading to excessive debt at all levels. Randol Gold Model was not completely alone in recognizing these as symptoms of a coming depression and gold boom. The US consumer and investor mentality that prevailed at the turn of the Millenium was recognized as analogous to that which prevailed in the late 1920’s just prior to the Great Depression (1929-1945) up to the crash of 1929… Sure enough, the Greed of 2000 turned to Fear; Speculation and wreckless spending is giving way to defensive saving. Asset inflation of the 1990’s has been replaced by asset deflation especially in the overbuilt US housing market. A pussball of toxic asset backed securities was sold around the world before bursting around 2005 or thereabouts triggering the global banking crisis of 2008.
History repeats itself. A post civil-war railroad boom led to a speculative share market boom ending with a crash in 1870 followed by a depression that lasted from 1870-1896. The depression that followed the crash of 1929 ended around 1940 when World War II put the US back to work ending the Great Depression in the US around 1945… The Great Depression lasted much longer in Europe, however. Depressions typically last around 20 years.
During depressions Governments tend to pump low-interest money into the economy to maintain liquidity and to preserve the banking and credit system. The rich get richer while the poor get poorer. This leads to increased taxation of the rich to fund more social programs to relieve the poor. The rich, in turn, seek to preserve and protect at least some of their wealth by buying gold which regains its stature as the ultimate store of value.
Around 2000 Randol Gold Model predicted a Depression…It could not, however, tell at that stage whether the depression would be deflationary, inflationary or stagflationary but a depression it would be. It now appears that the US is heading for cost inflation with simultaneous asset (i.e. real estate and mainstream stock) deflation introducing severe strain on the banking and credit system even beyond the banking crisis of 2008.
What does all this mean?
Randol Gold Model predicted a Depression….and that is what we got.
Randol Gold Model (2000) predicted much higher gold prices …and that is what we got
Randol Gold Model (2000) predicted higher base metal prices …and that is what we got
Looking ahead, what does Randol Gold Model predict?
1) Gold prices trending significantly higher and remaining high through 2020
2) Gold mining and exploration share prices staying high for at least five years after gold price has peaked.
3) Base metals and energy markets remaining firm unless the Chinese economy has a serious hiccup which is not at all impossible.
4) Further increases Government employment and borrowing (printing?)
5) Serious permanent job losses in the US private sector likely also a period of increased taxation punishing the rich (few) while doling out to the poor (many).
All the predictive trends shown and discussed in Randol Gold Model 2002, 2004, 2006 and 2008 are still intact in 2010, other than higher US interest rates that the model predicted. One might have expected that the US would have to raise interest rates to offset higher risks in its borrowing if it was playing by the rules. The fact that interest rates remain so low and have even been decreased is an indication that the US Government has found a digital way to “print” money that it previously would have had to borrow.. That is further evidence that we’re in a depression rather than just a recession. The amounts involved have become too big to borrow and far too big ever to be repaid unless repayments are made with a seriously inflated US dollar.
We hear that Euroland countries and companies are also highly leveraged and around the world there seems to be a race to devalue currencies to make exports more competitive.
The above supports the case for significantly higher gold prices ahead.
Randol Gold Model 2001 observed that 1,000 oz of gold was worth around $250,000, roughly the price of a middle class home. Randol Gold Model suggested that by 2010 the gold price might be $1,000 while middle class homes might be bought for $200,000. In other words, $250,000 invested in gold in 2001 would be worth $1,000,000 enough to buy five middle class homes in 2010.
Today in 2010, owning five middle class homes might be less appealing, especially in regions of the country hit by unemployment where tenants have difficulty paying their rent. What will that original $250,000 invested in gold in 2001 will buy in 2021—instead of one middle class home, maybe it’ll buy a really nice farm, or even a small high-class resort…
Today in 2010, one oz of gold costs $1,350 – enough to buy nearly 100 shares in Ford Motor Company (F-NYSE), the only US auto maker that did not ask for a Government bail-out. On or before 2021, the Randol Gold Model suggests that the gold price will rise to a level where one ounce of gold may buy at least 500 Ford Motor Company shares. By then Ford Motor company dividend yield is also likely to be a whole lot better than today’s –percnt.