One after another, commodities from aluminum to natural gas have surged as COVID-19 pandemic aftershocks rattle supply chains. Gold could be next, although for very different reasons.
That is the view of two of the biggest names in Canadian mining — the former chiefs of Goldcorp Inc, David Garofalo and Rob McEwen — who predict that investors will catch on soon that global inflationary pressures are less transitory and more intense than central bankers and consumer price indices suggest.
When that realization sets in, gold’s inflation-protection appeal probably will send prices to US$3,000 an ounce, from about US$1,800 now, according to Garofalo, who ran Goldcorp before it was gobbled up by Newmont Corp and now heads Gold Royalty Corp.
Such a run-up would be a “down payment” to McEwen’s US$5,000 long-term prediction.
It comes as little surprise that gold executives have a bullish bullion outlook.
However, they do not often predict such a steep gain in so short a time. If other metals are any indication, the gold rally, when it comes, will be dramatic, Garofalo said in an interview on Friday alongside McEwen.
“I’m talking about months,” he said. “The reaction tends to be immediate and violent when it does happen. That’s why I’m quite confident that gold will achieve US$3,000 an ounce in months, not years.”
Gold for December delivery on Friday rose US$14.40 to US$1,796.30 an ounce, up 1.6 percent for the week.
The global monetary and debt expansion to cope with the pandemic, as well as secondary drivers associated with supply disruptions, will have people turning back to traditional methods of protecting wealth, said McEwen, the founder and former chairman of Goldcorp who now runs his namesake mining company and is a shareholder in one of the companies Gold Royalty is acquiring.
“It’s not just the dollar,” he said. “All currencies are buying less than what they were buying a year ago. So I look at that as an unprecedented development at least in our lives that is going to affect the value of fiat currencies around the world.”
Its universality and 4,000 year-old history mean gold is better positioned than cryptocurrencies as a hedge against an inflationary environment that “will have deep and meaningful impacts on our capital,” Garofalo said.
Inflation is also rippling through the gold industry, with labor and input scarcities emerging and costs rising.
That creates another incentive for mid-sized producers to seek savings through mergers and acquisitions after years of underinvestment saw reserves shrink, he said.
Additional reporting by AP, with staff writer
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