Breaking Through the Ceiling: Mining Tycoons’ Perspectives on Repeated Surges in Gold Prices

Mining Tycoons' Perspectives on Repeated Surges in Gold Prices
Published on: May 21, 2024

Since 2024 began, gold prices have frequently hit new historical highs. The global gold market has recently welcomed another wave of price increases. On Monday, international spot gold extended last week’s gains, at one point reaching $2,450 per ounce, setting a new intraday record.

In 2023, the high yields and safety offered by the bond market and interest-bearing assets made them more attractive, leaving gold investors on the sidelines. Consequently, gold prices hovered between support and resistance levels.

However, 2024 witnessed a sharp rise in gold prices.

Michael Oliver, founder and CEO of Momentum Structural Analysis, remarked that the current market resembles the gold bull runs of 1979-1980 and 2010-2011. Similar to now, those periods were marked by high volatility. In 1979, inflation surged, and central banks aggressively raised interest rates, while 2010 saw near-zero interest rates following the U.S. housing market crash and economic recession.

In times of extreme volatility and uncertainty, investors flocked to the gold market for safety, driving prices to new highs. Notably, silver prices saw even larger increases, rising two to three times more than gold. Oliver predicts that the gold market in 2024 will exhibit a similar trend.

Pierre Lassonde, founder and Chair Emeritus of Franco-Nevada Corp (TSX:FNV) (NYSE:FNV), also reflected on the market of the 1970s. He emphasized the inflationary environment, stating that persistent inflation would inevitably result from the Federal Reserve’s continuous money printing.

Luke Gromen, founder of the macroeconomic research firm Forest for the Trees, highlighted increased gold demand driven by de-dollarization. He pointed out that the demand for yuan-denominated oil has transformed gold back into an oil currency, with the oil market being 12 to 15 times larger than the physical gold market. To address global mistrust of using the yuan for trading commodities like oil, China has been buying gold on a large scale, elevating it to a matter of national security.

Moreover, this is not confined to China alone. The weaponization of the U.S. dollar has unsettled many countries, such as the BRICS nations, thereby fostering strong motives for global de-dollarization and diversified reserve assets. For instance, in 2023, global central banks purchased 1,200 tonnes of gold, over a third of that year’s total production (3,400 tonnes).

With the surge in gold prices, many investors are curious about the potential for silver prices to follow suit. Eric Sprott, founder of Sprott Securities and Sprott Asset Management, believes that the silver market is manipulated, with prices being suppressed by financial institutions that do not favor a silver price increase. Nevertheless, resisting the trend is challenging. According to the Silver Institute, silver demand exceeded supply by 200 million ounces.

Ned Naylor-Leyland, gold and silver fund manager at Jupiter Asset Management, also commented on the tight supply and demand in the silver market. He noted that even focusing solely on industrial demand, market imbalances would support rising silver prices. He concluded that silver prices will eventually rise, and the best way to profit is by investing in corresponding mining stocks.

Foreign Exchange Gold Precious Metals Silver