Gold’s Inflation-Haven Appeal Means ‘Violent’ Run-Up May Be Ahead

The comments below are an edited and abridged synopsis of an article by James Attwood

“One after another, commodities from aluminum to natural gas have surged as pandemic aftershocks rattle supply chains. Gold could be next, although for very different reasons.”

Gold’s Inflation-Haven Appeal Means ‘Violent’ Run-Up May Be Ahead - BullionBuzz - Nick's Top Six
Golden Bar Graph Symbol on The Wall

That’s the view of two of the biggest names in Canadian mining, the former chiefs of Goldcorp Inc., David Garofalo and Rob McEwen, who predict investors will catch on soon that global inflationary pressures are less transitory and more intense than central bankers and consumers price indexes suggest.

When that realization sets in, gold’s inflation-protection appeal probably will send the price to $3,000, from about $1,800 now, according to Garofalo. Such a run-up would be a down payment to McEwen’s $5,000 long-term prediction.

It comes as no surprise that gold executives have a bullish bullion outlook, but they don’t often predict such a steep gain in such a short a time. If other metals are any indication, the gold rally will be dramatic, Garofalo said, happening in months, not years.

The global monetary and debt expansion to cope with the pandemic, as well as secondary drivers associated with supply disruptions, will have people turning to traditional methods of protecting wealth, said McEwen.

All currencies are buying less than what they were buying a year ago, McEwen said. He looks at that as an unprecedented development that will affect the value of fiat currencies around the world.

Its universality and 4,000-year-old history mean gold is better positioned than crypto-currencies as a hedge against an inflationary environment that “will have deep and meaningful impacts on our capital,” Garofalo said.

Inflation is also rippling through the gold industry, with costs rising and labour and input scarcities emerging. That creates another incentive for mid-sized producers to seek savings through mergers and acquisitions after years of under-investment saw reserves shrink.

Another segment of the market that’s ripe for further consolidation, according to Garofalo, is royalty companies that offer upfront payments in exchange for a percentage of production or revenue.

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