Record high gold prices are here to stay,
according to several of the world’s most prominent gold mining industry
This was their emphatic proclamation at the Denver
Gold Group’s prestigious annual conference at the Grand Hyatt Hotel in Denver.
And as if on cue, gold’s performance gave plenty of credence to their bullish
remarks. Having easily breached the psychologically all-important $1,000 an
ounce mark the week prior to the conference, gold’s spot price continued to
gather momentum. Which, of course, delighted attendees at the world’s most
important annual congregation of gold mining and investment industry movers and
Among the power players who spoke enthusiastically
about gold’s future was Aaron Regent. He is the CEO of the world’s largest gold
miner, Barrick Gold (NYSE: ABX) (TSX: ABX), which is on-track to produce 7.2-7.6
million ounces this year. In his popular presentation, he said the yellow metal
will become increasingly attractive as a “safe haven” investment. Especially
against a backdrop of a sluggish global economic recovery, the world’s runaway
money supply, and looming inflationary forces.
He also said that such developments make it
unlikely that gold’s spot price will stumble badly again (as it did when it
briefly topped $1,000 an ounce in March, 2008 before retracing its impressive
gains all the way back to a low of $709 later that year).
“There are a number of factors supporting where the
gold price is today. Certainly the economic environment is part of that… So,
it’s understandable why gold is where it is (at over $1,000 an ounce),” he
As for gold’s further upside potential, Regent was
careful not to make any bold predictions but he did assert that its prospects
are “very positive,” especially as gold reverts back to its traditional role as
an inverse proxy to the trend in the US dollar.
Charles Jeannes, the CEO of Goldcorp (NYSE: GG) (TSX:
G), is like-minded in his outlook. His company is one of the world’s several
largest gold producers and is the fastest growing of them all. It has a
projected output of 2.3 million ounces for 2009. Jeannes told a packed audience
that continued inflationary fears and the prospect of an anemic US dollar “for
quite some time to come” will continue to be potent drivers for gold prices.
“We’re certainly in a rising price gold environment
right now… And there’s a lot of reasons to be bullish about gold prices going
forward,” he said.
He later told BNW News that he was not sure that
$1,000 an ounce would immediately assert itself as a new support level for gold
prices. But the fact that dark economic storm clouds are continuing to amass
means that this lofty price level is poised to become a springboard for the
metal’s next up-leg, he suggested.
Meanwhile, former Goldcorp CEO Rob McEwen was far
more explicit about what he expects gold will do next during his presentation as
the CEO of US Gold (NYSE.A: UXG) (TSX: UXG). His high-flying gold
exploration/development company is making impressive headway in its hunt for
significant gold deposits in Nevada and world-class silver discoveries in
“Gold is going a lot higher. By the end of 2010, we
will see $2,000 an ounce gold. And by the time that the gold cycle is over we’ll
see $5,000 an ounce,” he declared.
McEwen’s steadfast views may seem hyperbolic to
some. But when he speaks, everyone listens. That’s because he is regarded as
something of a legend in both the mining industry and the investment community,
alike. His claim to fame is that he developed Goldcorp from a standing start
with a market capitalization of about US $50 million to around $8.5 billion in a
little over a dozen years. During this time (1992-2005), the company’s share
price appreciated as much as 3,130%.
The US government is mismanaging its efforts to
stimulate an economic recovery by way of setting the stage for hyper-inflation
and debasing the US dollar in the process, according to McEwen. And that’s why
he believes that we are still in the early stages of an epic bull market for
Even the mid-tier to small gold producers at the
conference had plenty to say about the noble metal’s lustrous future. They
include Joe Conway, CEO of mid-sized IAMGOLD (NYSE: IAG) (TSX: IMG), which is on
target to produce around 910,000 to 920,000 ounces this year. IAMGOLD’s share
price has been a stellar performer since it bottomed out a year ago, reflecting
the company’s rising star in the gold sector.
“Absolutely $1,000 an ounce could be the new
support level for gold,” Conway told BNW News. “The massive financial stimulus
seen in the US and globally will have to lead to inflation, setting the stage
for an even higher gold price.”
Among the junior gold miners in attendance was
Timmins Gold Corp (TSX.V: TMM), which is scheduled to become North America’s
next gold producer, commencing in December of this year.
Notably, Timmins Gold is in the enviable position
of likely becoming the world’s first ever gold miner to command a four-figure
price for its inaugural gold bar. And with its projected mining costs at only
$412 an ounce, 2010 promises to be a banner year as the company quickly ramps up
its output to 80,000 ounces per annum.
Company CEO Bruce Bragagnolo is something of a
contrarian in the sense that he believes we are entering into an era of
deflation, which he expects to benefit gold prices.
“On the one hand, we may be headed for currency
inflation due to North America’s governments injecting massive amounts of money
in the system,” he said. “On the other hand, people are starting to save money,
rather than continuing to be big consumers. And this is going to put the brakes
on the economies of the world, which will lead to deflation. ”
“But none of this matters for gold, which will
maintain its value relative to other assets. And the profit margins for
producers will even improve,” he added. “But if instead we have inflation, then
all the inflationary arguments will hold true for the price of gold.”
Bragagnolo did, however, concur with fellow
captains of the gold mining industry in the belief that $1,000 an ounce will
prove to be a new support level for gold.
“This will be a new base for the next major upside
movement in gold’s price,” he said.