TGR: Do you have an intermediate term target price or forecast for gold?

PG: Yes, in 2009 I forecasted $1,300 for 2010 and +$1,500 in 2011, and I've stated repeatedly for years that what I've called the "mother of all bull markets" won't end, in my opinion, until there's a two in front of it (i.e., +$2,000/oz.). So, my long-term target remains +$2,000.

TGR: Where is the support on gold?

PG: The key support was $1,310, which it held, and major support would be the 200-day moving average, which is around $1,275 now, but that's going to inch up in the coming days. It has clearly held, and while I don't think we're going straight back up, I do think once again this mother of all bull markets has eaten up and spat out all the gold-top callers, the bubbles and the people who are looking for major corrections and who thought they could sell out and somehow get back in much lower.

TGR: If gold did reach the $2,000 level, what effect would that have on gold equities' earnings?

PG: One thing that's been most positive here in 2011 that we have not seen in the last couple years is the relative strength in the mining shares-even down so far as the junior level. Despite the correction of $100 or so on gold, we did not see a substantial correction in the mining shares. This was just another shallow and short-term correction. In fact, in recent days while gold remained flat, we saw strength in the mining shares. So to answer your question, I think that if those of us who are forecasting a much higher price for gold are right, then we should see a corresponding better percentage gain for the majors. I would feel confident that if we saw a $2,000 gold price, most of the major producers would likely have at least doubled in price, if not more. Now, I think one of the mistakes continuously made is that people think it always trickles down to the juniors. That's not necessarily the case. Juniors are valued more on an individual basis according to the projects they are trying to develop.

TGR: On January 26, you said that you were thinking about going short in the U.S. stock market and looking for that precious metals bottom. How does that look now?

PG: The U.S. stock market has been up on what I call financial heroin. The QE1 and QE2 [quantitative easing 1 and 2] and what the Fed has been doing in the market has really gone way past steroids and is really setting the U.S. stock market up for an eventual fall back to earth. So, I am looking to time that short position, but that has not been implemented yet. It's certainly getting to the point now where going short in the U.S. stock market could be advantageous. In terms of the precious metals market, I believe the next leg up may not be straight up, but will be healthier and work its way up.

TGR: Where should investors be looking now? What countries? What industries?

PG: I think people have to realize that the United States is no longer the economic engine that pulls the whole world around, and therefore one could be neutral to bearish, as I am on it and should look to other areas of the world that can grow. Clearly, China continues to be one of those areas. Brazil, Germany and other parts of Europe and even Canada offer more economic potential than the U.S. does. I think there are clear no-brainer industry plays which should continue to see large-scale interest over time. Three of them are based on things that we're running out of: One is water, two is food and three is general energy.

TGR: Chinese fiscal and monetary policy has worked quite well for China, but it's been very tough on the United States, especially in the last decade.

PG: I borrow a line from the very well-known hedge fund manager Jimmy Rodgers who said the best advice he could give regarding China and America is to make sure your children and grandchildren learn to speak Chinese. It's only a question of time as to when China replaces the United States as the world's largest economic power, and I would hope at that time that we also turn over to them the responsibility of being the world's policeman.

Nevertheless, China, whether they got there by hook or by crook, is certainly in a much more enviable position than the United States as an economic power and is becoming very close to being on the same scale as a military power. In the next 5 or 10 years, the better of the two markets would without question be China over the United States.

TGR: How do you play China?

PG: You can play it through ETFs that invest in Chinese stocks, and there are now some limited ways to play the currency. I think one way you play is to not be aggressively long U.S. equities.

TGR: I have heard Jimmy Rodgers say in the past that one reason people have had an aversion to Asian markets, and I guess you could say especially China, is that you might not be able to trust the financial statements.

PG: There is no question about that, but after what has happened in the United States, could you trust Wall Street any more than Chinese companies at this point? I mean if anybody is deserving of not being trusted after what's happened in the last few years, it's certainly Wall Street. Just think about it-two years ago we were told that if we didn't bail them out, the whole world was going to collapse, and now they're making record profits and giving away record salaries and bonuses. Something is wrong there. I believe America has been taken, and it was taken by Wall Street.

TGR: Why do you like iron?

PG: We like iron because outside of the United States we continue to see strong growth in Asia and particularly China. Iron ore is obviously a real necessity for that.

TGR: You like lithium, as well.

PG: Yes, lithium seems to have real legs, and there's a move towards it.

TGR: The driver here is batteries for cars. Is the electric car really the wave of the future?

PG: I don't know if it's the wave of the future, but there's no question that the next generation is not going to be able to depend on fossil fuels as we have because it's going to become quite expensive. It's my belief that $100/barrel oil will in the next decade become the bottom price for oil, which will translate into gas prices that will seriously impact most Americans. So, some sort of alternative way-with electrical power being one-where the cost to travel miles can go down versus up with gas is something that a lot of Americans are going to have to look at.

TGR: Even though there are limitations to the battery-powered car?

PG: Yes, I just think that the days where we can just buy gas and drive across America is going to change for many.

TGR: Another?

PG: One metal that doesn't get a lot of comment is cobalt.  Cobalt is becoming a very strategic metal used in a lot of different areas, and as people realize that I think it's going to become more attractive.

TGR: Gold is still your favorite metal.

PG: I'm still overweight in precious metals-gold and silver versus base metals. You know, when you call something the mother of all bull markets, which I believe gold and silver are in, I still believe you overweight yourself. Base metal companies are still worthy, but you want to be more weighted to the gold and silver market.

TGR: How do you play gold and silver right now?

PG: I think most people should have physical gold and silver. If they're not very large dollar investor or very diversified, gold and silver ETFs is the way. Then, the second way of course is ETFs that diversify themselves through mining shares, and the speculative way to play gold and silver is the junior resource stocks.

TGR: You like uranium, right?

PG: My tracking list is seriously overweighted to uranium. I don't think that the companies are cheap any more as a group, but they're certainly not close to overvaluation; and on a select basis, I think people can still be purchasing uranium plays.

TGR: Thank you for your time.

PG: Thank you.

Peter Grandich is the founder of Grandich.com and Grandich Publications and is editor of The Grandich Letter, which was first published in 1984. He blogs and comments daily on the world's economies and financial markets and posts his views on social and political topics. He also blogs about a variety of timely subjects of general interest and interweaves his unique brand of humor and every-man "Grandichism" expressions with his experience gained from more than 25 years in and around Wall Street. The result is an insightful and intuitive look at business, finances and the world, set in a vernacular that just about anyone can understand. In his first year, Grandich's wildly popular blog had more than one million views. Grandich also provides a variety of services to publicly held corporations on a compensation basis.