Investors should dedicate a small portion of their portfolio to gold amid market volatility: Epstein
Gold could top US$2,000 an ounce and will remain elevated over the next five years as the global economy contends with the impact of the coronavirus pandemic, according to the head of Newmont Corp., the world’s top miner of the precious metal.
“The level of stimulus globally that’s going into the economy certainly underpins higher gold prices for the longer term, and I don’t think that stimulus has stopped yet,” Chief Executive Officer Tom Palmer said Thursday in a phone interview from Perth. “You could certainly see scenarios that have it pushing north of US$2,000.”
Spot bullion is trading around US$1,720 -- close to a more than seven-year high -- and is forecast by numerous banks to extend gains as the impact of the virus pushes economies toward recession and prompts action from central banks. Those factors are adding to what was already a strong outlook, with rising demand among middle-class consumers in China and India and signs of supply constraints, Palmer said.
The metal is likely to trade in a range between $1,500 to $1,750 over the next two-to-five years “as the world adjusts to and accommodates the stimulus that’s coming,” he said. “You certainly might see that spike out of that from time to time.”
The scale of global monetary stimulus is a key factor that’s spurring investors to diversify into gold, Bloomberg Intelligence commodity strategist Mike McGlone wrote in a Wednesday note. “The foundation for higher prices has rarely been stronger,” he said.
While higher prices will strengthen Newmont’s ability to increase investor returns, the producer is also weighing the potential impact of any renewed coronavirus outbreak in the northern hemisphere winter. Newmont has shuttered some operations in Canada, Argentina, Mexico and Peru in recent weeks to comply with travel curbs or to protect local communities.
“We’re looking to have conversations with people around capital allocation and where best that additional cash might go,” Palmer said. “At this point in time, I would be wanting us to see how the world comes through and out the other side of this pandemic, and would probably look to carry a little bit more cash than you otherwise would.”
The company, which last year completed its mega-merger with Goldcorp Inc. and forged a Nevada joint venture top competitor Barrick Gold Corp. after fending off a hostile takeover approach, will also be cautious on pursuing options for further acquisitions, even if rivals become distressed as a result of the virus impact.
“If if we saw an opportunity come along that fits our filter then we’d certainly have a look at it, but it’s not something that we’re getting distracted by and it’s certainly not something we’re distracting our teams with,” Palmer said.
Australian-born Palmer, promoted in October to lead Greenwood Village, Colorado-based Newmont, has been working from his native country -- where his mother and adult children live -- for about the past four weeks, flying back from his home in the U.S. before travel curbs tightened.
“It doesn’t really matter whether I’m sitting in the dining room in Denver or the dining room in Perth -- it just means I’m working some funny hours,” he said.