Two mining stalwarts say the Donald Trump era may be bad for bullion in the near term, but the populist president-elect will be good for gold in the long run.
Pierre Lassonde, chair of mine streaming and royalty giant Franco-Nevada (FNV.TO), sees the strengthening U.S. dollar as the biggest risk for gold. A high U.S. currency is traditionally bad news for bullion prices since gold is priced in U.S. dollars.
The American dollar has bounced almost four per cent against its world counterparts since Donald Trump’s presidential victory on Nov. 8. Market watchers expect a surge of spending by a Trump administration could fuel inflation, pushing interest rates higher and attracting investors in search of yield.
“The most determinant for gold is the U.S. dollar,” Lassonde told BNN today in an interview. “Has the dollar topped out? In my mind, we may have another six months to nine months of dollar strength.”
But Trump’s promise to reduce America’s trade deficit will be bearish for the greenback, he says. “If he wants to export, his currency has got to be competitive,” says Lassonde.
Rob McEwen, chairman of McEwen Mining (MUX.TO), says gold prices are “going higher” this year because of Trump’s policies. ““There’s going to a tightening of the job market in the U.S., interest rates are going… more people are going to start thinking about inflation and getting protection.”
McEwen was inducted into the Canadian Mining Hall of Fame last night.
McEwen and Lassonde says the gold sector is facing big challenges. The industry isn’t achieving the big 30 to 50 million-ounce discoveries that were common in 1980s and 1990s and gold miners face steep regulatory hurdles getting projects approved. “It’s taking now on average 7 to12 years to permit a mine,” Lassonde said.
And there are reports the Liberal government is considering creating a mining ombudsman to rule on alleged abuses by Canadian mining companies abroad. Neither executive backed that plan.