Gold prices are likely to continue to rise this year amid economic uncertainty and investor efforts to hedge against inflation and dollar weakness, the founder of Barrick Gold, the world's largest gold company, said.
I happen to be very optimistic right now about gold prices, Peter Munk, Barrick's chairman, told Reuters in a telephone interview from his home in Davos, Switzerland on Wednesday.
I have to think they are going to be significantly higher than last year, just like last year was higher than the year before.
The huge cost of the U.S. government programme to revitalise the economy amid lower revenues is likely to introduce an enormous, enormous inflationary factor into the U.S. dollar, which I think will make gold more and more desirable, he said.
Munk, 81, said gold was akin to a thermometer of world economic health, and he saw little reason for optimism about a global recovery in the short term.
Gold has got a very strong and stable support right now as long as we have this enormous uncertainty out there and I think this uncertainty will probably last for a while because I don't see any major catalyst that can turn this around, he said.
Every year in the last three years as the world becomes less and less secure in terms of normal investments and people lose faith and confidence in bonds, stocks, secured debt instruments, people turn to gold, he said. It automatically attracts people in direct proportion to their fear, and that is fear of losing their money.
RECOVERY COULD HURT GOLD
Munk spoke to Reuters in a wide-ranging interview that included discussion of his plans to develop a luxury yacht port in the Adriatic Balkan state of Montenegro.
An economic recovery could bring a fall in gold prices, but Munk did not see that happening soon. Gold traded at a six-week low on Wednesday at around $886 an ounce, but has sharply risen in value in recent years.
If stability and growth and economic well-being comes back universally throughout the globe and it can be done without inflating our currencies, gold can fall out of bed, the billionaire said.
Founded by Hungarian-born Munk in 1983, Barrick has become the world's dominant gold player through expansion. Its founder said his firm would continue acquisitions.
Barrick has grown primarily through an aggressive acquisition program in the last 25 years so of course we'd be on the look out all the time for strategic acquisitions or mergers, that hasn't changed, he said.
Another factor impacting gold prices are lower returns from mining than in the past.
The major gold deposits throughout the world in the main have already been found, so it's getting more and more difficult, and that's why you see global gold production heading downwards, despite higher prices and increased spending on production, Munk said.
Barrick was unlikely to diversify further into base metals, but would likely recover greater amounts of copper in the same areas in its quest for new gold.
It is inevitable that our copper production will grow, he said. If the world straightens itself out and we resume growth and expansion -- and I don't think we will, by the way, not on the short term -- then copper is a wonderfully profitable base metal to mine. (Editing by Sue Thomas)
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