‘Sticky’ Inflation May Drive Gold to New Peak, Agnico CEO Says
(Bloomberg) -- Gold may hit a fresh record high in the next 12 months as investors seek haven from a buildup of inflationary pressures.
That’s the view of Agnico-Eagle Mines Ltd. Chief Executive Officer Sean Boyd, who expects bullion to surpass the current record of $2,075.47 an ounce reached in August last year.
“Inflation is not transitory,” Boyd said in a phone interview, noting that costs pressures are “more sticky” than three months ago. “We’ll see higher inflation as we move down the road, which is generally a very favorable environment for gold.”
Bullion’s traditional role as a haven asset in times of economic turmoils has faltered this year as the global economy gradually rebounds from Covid-19’s nadir. Massive pandemic-era stimulus and reopening economies have also led to rising inflation, while power shortages accelerated a surge in energy prices on top of a broad commodities rally. This sparked concerns that higher prices may stay much longer and hurt a nascent recovery, boosting gold’s appeal as an inflation hedge.
One difference this time around is that large corporations are talking about passing through increased costs to consumers, which will ultimately lead to higher labor costs, according to Boyd, whose comments came after the Canadian gold miner posted third-quarter earnings on Wednesday.
Cost pressures, largely stemming from rising commodities prices and global supply chain woes, have accelerated for Agnico since the second quarter, the Toronto-based gold miner said in its earnings statement.
‘Merger of Equals’
Spot gold is headed for its third straight weekly advance as bond yields slid amid concerns over the global recovery. The precious metal was up 0.3% at $1,801.49 an ounce as of 10:20 a.m. in New York.
“The current gold price is good for the industry, and the industry remains fairly discipline in terms of capital allocation,” Boyd said, adding that any opportunity from reaching new highs “is more in the high-quality gold stocks than it is in gold.”
Boyd also said Agnico’s “merger of equals” with Kirkland Lake Gold Ltd., announced in late September, will continue to focus on exploration as the gold industry consolidates during the next couple years.
“The best way to participate in that consolidation is to focus on regional opportunities -- not just to get bigger, but to focus on in areas we’re currently operating where we can realize significant synergies,” Boyd said. “The merger with Kirkland does that. We always look for opportunities in the regions we operate in.”
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