Currency and the "So What" for OGX, page-89

Hi Td,

The current markets issue is a strong USD not a strong gold price (as determined against the USD). Previously when a global downturn was looking likely the gold price would increase (vs the USD) currently we are seeing the opposite. That is the money is going into the USD rather then Gold.

As the USD strengthens all other currency's weaken against it. Hence the BRL vs USD being at 4:1, this makes the BRL vs gold look favourable. But again this is not due to a gold price increase as in other global downturns, for this reason the market is still reasonably confident the global recession is not going to happen tomorrow.

It does however mean weakness for emerging markets like ours. Now the country needs to decide how it will deal with this, does it print money and drive inflation? Does it sell off all it's USD for a quick gain? Perhaps they even mandate a central bank that all precious commodities have to be sold to so the country can sell it on and make a quick profit to stop the BRL falling.

There is of course another option, increase exports, which is where we sit. If gold mining becomes more profitable and the country stays favourable to miners then our business case for ramping up just got better. If we start to produce more and sell more gold then the country can make money off the taxes which will help to bring the BRL back against the USD. The good part is it is a long term fix where the others are all short term.

"Think a bit bigger than just one company hey... macro economics" I did, and then I took it in context with the company I'm invested in.

Regards WK