Norman: But it seems like you feel it’s a little bit bubbly up here. I mean, when you say there’s going to be a pullback, let’s assume the Fed does change its monetary policy sometime in 2010. We start to see them nudge interest rates back up. Where can gold go? Let’s start off with just understanding: What is the average cost of production?

Perez-Santalla: Well, the average cost of production, that’s a hard thing to nail down. But it’s been projected between $400 and $500 an ounce.

Norman: So that’s a significant distance from where we are right now.

Perez-Santalla: Exactly. So it’s a tremendous profit these mining companies are having if they're running their books properly, and anyone involved in that side of the business. So it could go down even that low. But I think that a healthy price level for the market would eventually be somewhere between $700 and $800.

Norman: $700 and $800. And I believe during 2009 we did dip down into the $700 handle, if I’m not mistaken.

Perez-Santalla: Yes we did. And at that time, industrial demand grew. And they started buying the jewelry sector – traditionally the largest consumer of gold – really buying a lot and selling to the public a product.

Norman: Now, you talked about the commercial interests, the commercial players in the market, and how the price … you talked about the mines, how they're making really good money right now with the price where it is. That would imply that production is way up. Is that actually what’s happening?

Perez-Santalla: Oh yeah. They’ve grown production. They’re opening mines everywhere they can. So any place that they can get to gold easily, it’s being done. So that’s why sometimes you’ll hear supplies are off here, or a mine has some trouble in South Africa and it's closed up for a month … doesn’t really affect supply.

And also, with these high prices, we’re getting a lot of scrap supply, which means people are rummaging through their drawers, are going through anything they can to find precious metals to sell, to raise some cash. So even here, the supply of gold feels infinite, from our point of view.

Norman: Now, what is the ratio – ballpark – in terms of investment demand; how many tons per year, vs. jewelry demand or industrial demand? Isn't it something like 2,500 tons a year?

Perez-Santalla: Percentagewise, traditionally, jewelry was 80 percent and investment was down as low as 5 percent, in terms of the actual consumption. But now we’re seeing that jewelry demand is only about 30-40 percent, and predominantly, the rest is investment.

Norman: All right. And also, just quickly, if we see a lot of the interest in gold has come from a view that the U.S. dollar is going to continue to decline … we started to see some improvement in the dollar over the last few weeks. If that continues, will this sort of cool off that speculative activity, do you think?

Perez-Santalla: Actually, I believe it will continue. And I do believe it will cool that off as well.

Norman: It will cool it off?

Perez-Santalla: Because what’s driving that is the low interest rates. People are selling those dollars to buy the gold. So they borrow dollars, sell the dollars, and buy the gold.

Norman: Right.

Perez-Santalla: And that’s what’s going on. And that’s the investment community that’s driving it, because the banks are lending to the investment community, not to the industrial sector.

Norman: All right, so you’d say, for your outlook at these price levels, I think you’d probably say, is cautious …

Perez-Santalla: Yeah, I’d be cautious. In the beginning, I’d say it’s going to start to go up again. But, there’ll be a correction coming.

Norman: All right, a correction coming. A cautious outlook from Miguel Perez-Santalla. That’s it for our first interview. I will be back with the second part of my discussion with Miguel. Stay tuned. And of course, as always, we have a lot of great resources on this site, folks. This is Mike Norman, signing off for now. See you next time; take care.