Gold prices could rise to as high as $2,500 an ounce in the next five years and retain its safe harbour status for as long as the world’s financial system remains in crisis mode.
Quoting officials of Newcrest Mining, the world’s No 3 gold producer, news agencies are reporting that gold will remain a hedge against a global financial breakdown, citing risks such as a devaluation of the US dollar, the global currency, European economies in dire shape and persistent political tensions throughout the globe.
Newcrest chief executive Greg Robinson told a business lunch at the weekend that he would peg bullion to trade between $1,500 and $2,500 an ounce over the next five years.
“For all investors, gold is an insurance against a breakdown in the international financial system,” Robinson said.
Gold is trading around $1,747 an ounce, close to two-month highs, following a surge in January amid concerns about the euro zone debt crisis. Robinson’s view was in line with US Gold Corp’s outlook for gold prices, although an analyst said $2,500 may be too bullish.
“That sounds pretty high to me, but maybe I’m more conservative than him,” said Keith Goode, a gold analyst at Eagle Research Advisory, adding that $1 800 to $2 000 may be a more realistic range.
Robinson said he expected the gap between soaring gold prices and share prices of gold miners to narrow with miners’ share prices rising rather than gold prices falling. Newcrest share have fallen close to 10 per cent since mid-November. Spot gold over the same period is down less than 3 per cent.
Newcrest expects to produce 2.43-million to 2.55-million ounces of gold in the 2011/12 financial year from its mines in Australia, Papua New Guinea and Indonesia. Robinson also said preliminary studies on a promising prospect in Fiji were taking longer than expected due to consultations with local residents.
Newcrest is the manager and 69.94 per cent owner of the Namosi joint venture, which contains the Waisoi deposit in Fiji, said by some geologists to be one of the world’s largest.