(Bloomberg) – Gold may reach a new record high in the next 12 months as investors seek refuge from accumulating inflationary pressures.
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That is the opinion of the CEO of Agnico-Eagle Mines Ltd. Shaun Boyd, who expects the bullion to surpass the current record of $2,075.47 an ounce reached in August last year.
“Inflation is not temporary,” Boyd said in a phone interview, noting that cost pressures are “more consistent” than they were three months ago. “We will see higher inflation as we go along, which is generally a very favorable environment for gold.”
Bullion’s traditional role as a haven asset has faltered in times of economic turmoil this year as the global economy has gradually recovered from the nadir of Covid-19. Massive pandemic-era stimulus and the reopening of economies have also pushed up inflation, while energy shortages have accelerated energy price hikes on top of a broad rally in commodities. This raised fears that higher prices could linger for longer and hurt the nascent recovery, boosting gold’s appeal as an inflation hedge.
One difference this time around is that large companies are talking about passing on increased costs to consumers, which will eventually lead to higher labor costs, according to Boyd, whose comments came after the Canadian gold miner reported third-quarter earnings on Wednesday.
Cost pressures, caused in large part by higher commodity prices and global supply chain problems, have accelerated for Agnico since the second quarter, the Toronto-based gold miner said in its earnings statement.
merger of equal companies
Spot gold is heading for its third consecutive weekly advance as bond yields fell amid concerns about the global recovery. The precious metal was up 0.3% at $1,801.49 an ounce as of 10:20 am in New York.
“The current price of gold is good for the industry, and the industry remains fairly disciplined in terms of capital allocation,” Boyd said, adding that any chance of reaching new highs “is more in high-quality gold stocks than in gold.”
Boyd also said the “Agnico merger” with Kirkland Lake Gold Ltd. , announced in late September, will continue to focus on exploration as the gold industry consolidates over the next two years.
“The best way to participate in this consolidation is to focus on regional opportunities — not just to scale them up, but focus on areas where we are currently working where we can achieve significant synergies,” Boyd said. “The merger with Kirkland does just that. We are always looking for opportunities in the areas where we operate.”
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