Randgold Resources Ltd., which operates mines in Africa, sees more upside than downside for gold prices as central banks in emerging markets buy the precious metal and producers limit new output.
The gold market is showing signs of inelasticity, supply is tight and production costs are high, Chief Executive Officer Mark Bristow said yesterday in Toronto, where he was attending the annual Prospectors & Developers Association of Canada convention. Gold miners, which have underperformed the metal for the last six years, are under pressure to improve returns and that will probably lead to less gold production globally, he said.
“I still believe there’s more upside than downside in the gold price, particularly if the industry is going to be driven to make those hard decisions,” Bristow said in an interview. “I don’t think there’s much room to go below $1,500 this year and I still believe there’s every potential for it to go $200 above that.”
Gold for delivery in April climbed 0.2 percent to $1,577.50 an ounce at 4:17 p.m. in New York. The metal has dropped 5.9 percent this year following 12 consecutive annual gains.
Central banks will again be strong buyers this year after they boosted purchases 17 percent to 534.6 tons last year, the most since 1964, according to the London-based World Gold Council.
Bristow said he’s looking for opportunities to sign joint-venture agreements with exploration companies, which are struggling to access finance. Randgold signed an agreement in December with Kilo Goldmines Ltd., a company with licenses in Democratic Republic of Congo, and will fund exploration on Kilo’s prospects in return for incremental ownership stakes based on certain milestones.
“With the tightness in the junior market we are expecting to do more of these Kilo-type earn-in joint ventures,” Bristow said.
Randgold rose 0.3 percent to 5,515 pence in London.