Gold a quintessential hedge against currency erosion: Precious metals investor
High Ridge Futures director of metals trading Dave Meger discusses the rise in gold investment amid coronavirus fears.
Get all the latest news on coronavirus and more delivered daily to your inbox. Sign up here.
Continue Reading Below
The COVID-19 pandemic could lead to a flurry of deals in the gold mining industry, according to Barrick Gold CEO Mark Bristow.
The pandemic has caused some miners to put operations on care and maintenance, shrinking gold supplies. At the same time, major central banks and governments have been injecting cash into their economies, devaluing their currencies and spiking interest in gold, a traditional safe haven.
“There's a real opportunity that there might be some acquisition options coming out of this,” Bristow told FOX Business. “We’re certainly keeping very busy looking at those options.”
|GOLD||BARRICK GOLD CORP.||20.55||+0.60||+3.01%|
All of this comes as gold is seeing a declining reserve base due to miners not investing in their future and production forecasts pointing to a 20 percent to 30 percent decline in new gold supply over the next 10 years.
CORONAVIRUS RELIEF MAY HELP GOLD MINERS STRIKE MOTHER LODE
The gold mining industry has 14 so-called tier-one assets, according to Bristow, and Barrick already has six of them, including three in Nevada, two in Africa and one in the Dominican Republic. The company has a handful of other assets that are on the verge of becoming tier one, which refers to mines that have produced more than 500,000 ounces of gold per year for at least 10 years at the lower half of the cost curve.
|GLD||SPDR GOLD SHARES TRUST – EUR ACC||156.88||+4.23||+2.77%|
Bristow says the opportunity created by the COVID-19 pandemic is similar to what happened following the 2008 global financial crisis when miners found themselves in an environment that was ripe for deals as the price of gold surged from about $700 per ounce to $1,900 before collapsing and leaving a trail of destruction.
“You've got to be careful that you don't blow your brains out like the industry did between 2009 and the run-up to the peak in 2012,” Bristow said.
The VanEck Vectors Gold Miner ETF hit a peak market capitalization of $10.79 billion in September 2011 before falling to below $4 billion in January 2016.