Gold losing its lustre as cryptos rise? Don’t bet on it, says globalisation expert
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Despite high Aussie dollar prices, gold miners have suffered from a stagnant price and investor disinterest in recent months, leading some to label cash generating gold producers a “contrarian investment”.
As a hit to iron ore prices sunk the shares of many of the biggest ASX miners on the eve of the Diggers and Dealers Mining Forum in Kalgoorlie, the conference has opened on a positive note for the goldies who have converged on the famous Wild West mining town.
Keynote speaker and globalisation expert Professor Ian Goldin said the outlook for gold remains strong despite concerns its traditional role as a store of currency could be eroded by the rise of new financial instruments like cryptocurrencies.
“Gold as I indicated will be robust, I do not see a fundamental threat to gold. The central banks that were going to unload gold have largely unloaded it, and I don’t see much more disinvestment from central banks,” he said.
“I believe as the returns in so many other areas are so low – and will continue to be with the monetary policy and excessive quantitative easing that we’re seeing – the need for gold hedge will continue to be very significant.
“I think as long as these threats of a pandemic and tensions with China remain we’ll continue to see anxieties which hold it up.”
Music to the ears of the multitude of Australian gold miners and explorers presenting in Kalgoorlie this year, with Red 5 (ASX:RED), Karora Resources, AngloGold Ashanti (ASX:AGG) and Regis Resources (ASX:RRL) all among the significant gold names presenting today.
Gold prices were steady at around US$1811/oz this morning or $2470/oz Australian.
Goldin also flagged an impending ‘cold war’ on the back of trade tensions and political discord between China and the West.
He said demand for sources of critical minerals like rare earths from countries like Australia would continue to rise, but warned against protectionist economic policies re-emerging in the context of Chinese trade tensions.
“Demand is so rapidly going to exceed supply in rare earths and in the commodities which are vital for electric vehicles, for batteries, for transmission,” he said.
“Of course the worst thing that governments can do in response is become more nationalist and protectionist.
“One thing we’ve learnt from history is that is the only way to reduce supply in the longer term.
“I think the biggest worry for me is the semiconductor industry because so much depends on it, and I think that is going to require some concerted effort by some big governments to try and diversify supply of semiconductors, and there’s also massive issues about a global monopoly or oligopolistic practices which come into play.
“The challenge … for medium sized countries like Australia is how do you play in that because you can’t build your own industries in these areas.
“I think it is going to be a concern; the danger is that it feeds populism and protectionism and that will feed the problem, not resolve it.”
Goldin also called on the US and Australian governments to be more constructive in their dealings with China, saying tensions that have seen China bar Aussie exports in commodities like wine and coal and included the country trying to jawbone down the price of iron ore, were a net negative.
“Pushing into corners and public attacks are not going to get a positive response back and I believe it is escalating the tensions,” he said.
“What we need is de-escalation, an agreement to talk fundamentally on the principles we uphold but not allowing that to get in the way of business and not allowing it to get in the way of agreeing to work together on solving global problems.”
In demand rare earths company Lynas Rare Earths (ASX:LYC) is one of the major rare earths players presenting this year, having recently flagged strong conditions and revealing plans today to expand its resource at the massive Mt Weld mine in WA by drilling a km-deep diamond drill hole at the Laverton deposit.