Post summer doldrums, we're now beginning to see a nice fall run up in the price of gold—one that marks the beginning of a parabolic move, according to Greg McCoach. The seasoned bullion dealer, investor and newsletter writer sees a number of factors culminating in ever-increasing prices going forward. In this exclusive interview with The Gold Report, Greg reveals current and forthcoming events that will continue driving the yellow metal's price northward . . . not the least of which involves the commercial real estate market and its "associated derivative sewage."

The Gold Report: Greg, gold has really started to take off. You've talked about a parabolic move for gold. Are we in the beginning of that?

Greg McCoach: Yes, I would say so. I've been anticipating a nice fall run up. We knew we'd experience the typical summer doldrums, but a couple of things are happening right now.

First, you've got the major gold traders coming back from vacation and starting to make some trades. But more importantly, there were two major announcements in the first week of September that could really launch gold. We could see $1,500 gold this fall. No doubt about it.

TGR: What two announcements are those?

GM: First, the Chinese, in layman's terms, put a stop loss on their derivatives, which they're taking a bath on. These were sold to them from the likes of Goldman Sachs. This is a huge development. In other words, the Chinese are basically saying it's a fraudulent transaction—which it was. Goldman Sachs sold these same instruments to Iceland and what took the country down were the derivatives, right? And the people that created these derivative packages and sold them to others like Iceland and China knew full well that they were flawed, that there was no way these people were going to make money on them. So, knowing that, now the Chinese government says we are putting a stop loss on our losses on these instruments and we're simply not going to pay anymore. So that's good. Somebody's standing up against these corrupt jerks who have been taking advantage of other people.

That was a big development and, if you notice, there's been a lot of discussion. Independent-thinking kinds of newsletters have been talking about this and, so, we've seen gold start to rise up.

The second big announcement is that the Hong Kong Monetary Authority has built its own high-tech vault to store its own gold, and they just requested delivery. Up to this point, the Chinese gold had been stored and vaulted in London, England. So now the Chinese are requesting their gold be shipped from London to their new vault in Hong Kong. This has major implications because this is a large amount of physical gold, and I think what it's going to do is begin to expose the naked shorts who have been playing this game with the gold and silver markets, trying to keep a cap on the prices. So this is a major, major development.

TGR: Why would moving gold from one vault to another vault expose the naked shorts?

GM: Because they won't have access to that gold. In other words, the shorts, in order to keep a lid on the gold prices, can't control the gold price. This goes into the manipulation. I don't talk about this too much just because, to me, it really doesn't matter. In the end, manipulation never works and free markets eventually overcome any manipulative activity, and gold and silver will go to where they're going to go. But in this case, the way they've been able to play this game over the years—and it's been going on for a long time—the manipulation crowd could short paper contracts of gold and silver with huge amount of paper contracts. They didn't have the physical metal to deliver in case the longs decided they wanted delivery. They would get caught if they didn't have enough physical metal to meet those demands.

So I think it really means that the whole situation of manipulating and playing games with the gold and silver markets just puts even more pressure on it when people start taking delivery of their gold. We all know that the manipulation game will be over at some point when there's no gold left to play the game. Then the manipulation crowd has no ammunition to play and that'll all go away.

TGR: Is this what's really causing the parabolic move for gold or are there other factors?

GM: No, there are other factors. This is just the starting point. What I'm saying is we're starting to see gold ramp up. The bigger factors are the derivatives associated with the commercial real estate market. I think that's going to start to blow up this fall and into early next year. And that's because the commercial real estate market and its associated derivative sewage is much larger than the derivative sewage associated with the residential real estate mortgages that went bad.

We're going to go through another round of this. This round looks like it's going to be worse than the last round. And any hogwash about people thinking the economy is back on track and all this stuff from Joe Biden that a million new jobs were created, that's just nonsense.

TGR: Would you anticipate the market to crash like it did last year as the residential real estate bubble burst?

GM: Here's the different scenario that I see. Yes, it's going to affect markets—stock markets will plummet worldwide; but I think it will be different for the precious metal stocks. The mining stocks and precious metals got sucked right down the toilet in the last meltdown. That was unexpected. The reason for that was that all the big hedge and index funds had to liquidate, and they were heavily invested in precious metals and junior mining stocks. So, as that crowd had to sell to raise cash for their clients who were sending in their redemption notices, that's what hurt us.

This time I think we will get the disconnect. I think precious metal prices will soar to new highs and people with money will flock into the precious metals and the mining stocks as a refuge, as a safe haven. Yes, it'll affect world markets again, but I think the precious metals will have an insulating protection because people will finally start to realize that precious metals are where you need to be. There will be a new interest and a beginning of a big flow of money into the precious metal sector.

TGR: So if that's true, won't all boats float up if precious metals start to take off? Won't all juniors see appreciation in the stock price?

GM: When the market kicks into gear, the money goes first into the majors, then the quality juniors, and then eventually—you know, even turkeys can fly, right? The more quality-oriented companies will definitely be the bigger recipients of the best funds because people are more selective now than they were before.

Since the last meltdown people have definitely gotten more educated in certain areas where you have to be. You can't just put your money in a mining stock anywhere in the world. It has to have infrastructure. If it's in an existing mining camp, that's better than in an area that has no infrastructure and no mining camp. Why? Because the developmental costs to put something into production are so much higher in those kinds of areas.

So smart money people are looking for new discoveries in existing mining camps, where all the infrastructure exists. So those will be the companies that make the big runs, and that's what I'm focused on right now. That's what I've been focused on in the newsletter—looking for these opportunities.

TGR: What's your recommendation about owning physical metal vs. equities? And should the mining stocks be in the major, juniors?

GM: I always recommend owning the physical metals, gold and silver, the bullion bars and coins and the mining stocks. Now for some people, the majors work better for them and their portfolios than the juniors. I personally like the juniors because of the leverage. When someone makes a discovery, as a junior you can make up for a lot of losses very quickly with just one discovery, if you own the right junior mining stock.

So we play the odds; we know we're not going to win on all of these stocks. But in a good market, where we see a parabolic move, hell, everything's going to move. We're hoping to have some of those that do those big moves and everybody's happy and we'll take our profits and buy other real assets. At that point it could be undervalued real estate, it could be undervalued ranch land. I'm only willing to give up my precious metals and my precious metal mining stocks for other real assets because I don't want to hold dollars at this point. I'm not interesting in holding U.S. dollars in quantity.

TGR: Especially if they're going to be losing value.

GM: Right. A U.S. dollar devaluation at this point is as certain as death and taxes in life. We just don't know the exact timing; that's all.

Should You Own Physical Metal or Mining Stocks?

TGR: What are some of your favorite juniors?

GM: Let's talk about Pediment Gold Corp. because I still list them as number one. Their stock has been a little quiet this year because the company really hasn't made much in the way of news and it looks like that's finally going to change.

They got out their new 43-101. It wasn't spectacular, but it wasn't bad news. It was a drastic increase in the quality of ounces, from 1.45 million to basically 1.65 million in total ounces, but the quality of ounces went from the inferred category to what we call the measured and indicated. That's a quality differential and that was a good announcement from that standpoint.

So I think what's going to happen now—and the company hasn't made any news yet—but their share price, when it ran up to $3.50, $3.60 a share, was based on the discovery news on their southern Baja property in Mexico, in what we call the San Antonio District. I would guess the company now is going to get back into a major drill program at some point this fall and I'm waiting for that news.

I've always said this is going to be a 2 to 3 million-ounce deposit, a sizeable gold deposit. It's in a good jurisdiction, and we can look forward to a lot of appreciation on our share price. What's great about it and why I still have it as a strong buy, number one, is you can still buy it so cheap; it's 80 cents, under a buck. It's dipped down as low as 70-75 cents. It's been as high as about $1.20 in the last six months. So it's at a good range to buy it right now before we make the move.

They also have a production scenario at another project, La Colorado, that's moving forward very nicely. They're drilling on this and they're finding even more ounces that El Dorado Gold left over. El Dorado Gold was the one that started that mine. It's now been opted to Pediment, who now controls it and is moving it back into production again.

Now as gold prices go up and they keep the drills going and they make further discoveries, which I think is sure to happen down there, that will take that stock right back up again. So there are some good profit opportunities. Again, in the top ten I list the companies with the least amount of risk that have the biggest opportunity for profit.

So if somebody says, Greg, at this point all I have is enough money to buy one stock, you should buy Pediment Exploration because it has the least amount of risk and the biggest upside for a junior mining stock at this point. There's a nice cash flow for the company that could be in production next year sometime and that stops shareholder dilution and that's as good as it gets in the junior mining business. A nice big discovery that's increasing in size and a good jurisdiction with another project also in Mexico that was an existing mine that is now being put back into production for cash flow, so the company doesn't have to keep raising funds in the private markets that dilute current shareholders. That's a good story. It doesn't get much better than that. And don't be discouraged by the price. That's just because there's been little in the way of news and the company's been protecting their savings. They've got about $14 million in the treasury and they've got plenty of room to do some things.

TGR: Another company that's on your strong buy list is Fortuna Silver Mines Inc. (TSX.V:FVI, Lima Exchange:FVI), which happens to be a silver play.

GM: I love silver. I'm not one of these guys who only likes gold. I love Mexico and a company like Fortuna, who's got not one, but two assets. One is already in production; one will soon be in production. Peru and Mexico are the two countries those assets are located in. They have a very low cost of production. The material is good grade and it's high profit with higher silver prices. This company will do very, very well. You'll see a multiple gain in this stock price.

Again, it's starting to bump up a little bit, but it's still reasonably priced. I think you can still buy this one and do quite well with it. If you believe silver prices are going higher, Fortuna Silver is a no-brainer.

TGR: Excellon Resources Inc. (TSX:EXN) is also on your list as a strong buy.

GM: Excellon is a very, very fascinating situation. It's been a long-term recommendation in my newsletter. We originally bought it years and years ago at 15 cents. It ran all the way up to two bucks. We made lots of money on that one. It went right back down again with the meltdown. The company is starting to creep up again.

They recently did a deal and acquired a mine, which they needed to help them on the production side, which was a good move for the company. Unfortunately, they had to give away a lot of shares, so the company has a dilution problem right now and I'm not quite sure how they're going to handle that. At Platosa, their main project, they keep discovering more ore and the type of geology that this deposit represents is called a carbonate replacement system. These are the biggest silver deposits in Mexico in the most prolific silver mining belt of the world. It's right smack dab in the middle of this.

You get into the carbonate replacement system and it's like elephant hunting. Excellon has hit the trunk of the elephant and they're working their way up the trunk and I believe what is going to happen is they're going to hit the body of the elephant. When they hit the body of the elephant, all hell is going to break loose because that stock will just go through the roof.

They acquired Silver Eagle Mines, which I thought was a good deal and it gives Excellon a lot of other good exploration properties; but, more importantly, it gave them a production facility where they could process their ore. They're trying to get their own mill up and running at Platosa and that should be done, hopefully, end of '09, early '10.

They will have the shares outstanding, but once they get the cash flow going, if the share price doesn't go higher, the company could just start buying back their own shares cheap with the profits they have, reduce the number of shares outstanding. They could do a rollback, which I wouldn't be in favor of as an existing shareholder. One way or the other, Excellon will continue to move higher as they make further discoveries at Platosa, so it's still a buy.

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