Gold prices are poised to reach new highs in the next year amid global economic uncertainty and a lack of new supply, the biggest producers said.
Gold may exceed $2,000 an ounce within 12 months, Barrick Gold Corp. Chief Executive Officer Jamie Sokalsky and Chuck Jeannes, CEO of Goldcorp Inc., said this week in interviews in Denver, where they were attending the Denver Gold Forum. A gold price of $2,000 is “not unreasonable,” Newmont Mining Corp. CEO Richard O’Brien said in a presentation at the conference.
“The fundamentals that are backstopping a higher gold price are there,” Sokalsky, who heads the world’s largest producer, said Sept. 10. “I’m optimistic that, with the uncertainty throughout the world and the macroeconomic environment and some of the fundamental supply and demand aspects of gold, that we could see new highs on the gold price.”
Gold has risen for 11 straight years, reaching a record $1,923.70 an ounce on Sept. 6, 2011 in New York, as investors bought the metal as a store of value and hedge against inflation.
Gold futures for December delivery climbed 2.2 percent to settle at $1,772.10 today on the Comex, the first time above $1,770 since February, after the Federal Reserve announced a third round of quantitative easing to boost the U.S. economy and reduce unemployment.
‘Debasement of Currencies’
“The demand side is all about worldwide debasement of currencies and gold being seen as an alternative,” Jeannes, head of the second-largest producer by market value, said Sept. 10. “We see it with central banks buying gold and we see it with investors buying gold to protect themselves from the exposure to currencies that they don’t have confidence in.”
Central banks will increase gold purchases by 7.9 percent to 493 metric tons this year as they keep expanding reserves to diversify from the dollar and guard against a potential gain in inflation, Thomson Reuters GFMS, a London-based researcher, said in a Sept. 4 report.
Gold prices have risen as investors buy the metal because of economic uncertainty and in anticipation of more stimulus from the U.S. Federal Reserve, as well as in Europe, said AngloGold Ashanti Ltd.’s Mark Cutifani, CEO of the world’s third-largest gold producer.
“Investment demand has been pretty strong,” he said in a Sept. 11 interview in Denver. “I could easily see it going through $1,800 by Christmas.”
It’s becoming more accepted that gold “has a role to play,” Agnico-Eagle Mines Ltd. CEO Sean Boyd said in a Sept. 11 interview.
“Not the gold standard, but as equivalent collateral to a treasury bond, as possibly collateral on maybe sovereign debt issuances, is starting to be discussed,” Boyd said. “That wouldn’t have happened five years ago.”
A lack of new supply will also support prices, Goldcorp’s Jeannes said. Producers including Barrick and Toronto-based Kinross Gold Corp. have said they will be more disciplined in spending on projects and will target higher returns rather than production growth.
Gold mine supply will probably be “flat and eventually declining,” Jeannes said. Companies that were trying to build large, low-return projects as a play on future gold price increases are not getting support from investors, he said.
“The market is not letting them do that, they are not giving them the money to do it,” Jeannes said. “So we are limited to high quality, high return projects that don’t require a higher gold price to succeed, and that’s limiting supply.
The Philadelphia Stock Exchange Gold & Silver Index, which is made up of 30 gold producers, has declined 15 percent in the past year.