The inflation-haven allure of gold means that a “violent” rally may be in the future – News Couple
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The inflation-haven allure of gold means that a “violent” rally may be in the future


(Bloomberg) — One by one, commodities have surged from aluminum to natural gas as backlashes rock supply chains. Gold may be next, albeit for very different reasons.

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This is the view of two of the biggest names in Canadian mining – the two former presidents of Goldcorp Inc. , namely David Garofalo and Rob McEwen – who expected investors to soon realize that global inflationary pressures are less transitory and more intense than central bankers and CPIs.

When that realization kicks in, a gold inflation-protection order will likely send prices to $3,000 an ounce, from about $1,800 now, according to Garofalo, who ran Goldcorp before it was gobbled up by Newmont Corp. And now he heads up Gold Royalty Corp. The increase would be a “down payment” to McEwen’s long-term forecast of $5,000.

It’s no surprise that gold executives have a bullish view of bullion. But they often do not expect such a sharp gain in a very short time. Garofalo said in an interview Friday alongside McEwen that if other metals are any indication, the rise in gold, when it comes, will be dramatic.

“I’m talking about months,” he said. The reaction tends to be immediate and violent when it occurs. That’s why I’m absolutely confident that gold will fetch $3,000 an ounce in months, not years.”

McEwen, founder and former president of Goldcorp who now runs the mining of the same name, said the global monetary expansion and debt to tackle the pandemic, as well as secondary drivers associated with supply disruptions, will cause people to return to traditional methods of wealth protection. A company and shareholder in one of the companies acquired by Gold Royalty.

“It’s not just the dollar,” he said. All currencies buy less than they did a year ago. So I view this as an unprecedented development, at least in our lifetime, that will affect the value of fiat currencies around the world.”

Garofalo said its universality and 4,000-year history means gold is in a better position than cryptocurrencies as a hedge against an inflationary environment that “will have profound and meaningful effects on our capital.”

Deal Incentives

Inflation also spreads in the gold industry, with the emergence of scarcity of labor and inputs and rising costs. He said that this creates another incentive for medium-sized producers to seek savings through mergers and acquisitions after years of lack of investment that led to shrinking reserves.

Another market segment ready for further consolidation, according to Garofalo, are royalty companies that offer upfront payments for the right to a percentage of production or revenue. His company, Gold Royalty, went public earlier this year and announced three acquisitions including Abitibi Royalties Inc. and Golden Valley Mines & Royalties Ltd.

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