Growing investment demand for gold, combined with declining mine production levels in the longer term, will continue to support strong prices for the "foreseeable future", Barrick Gold CEO Aaron Regent. Although demand for the metal has strengthened significantly, the gold market remains small, and is "dwarfed" by other asset classes, he said at the company's shareholder meeting in Toronto.
As a result, a small transfer of investment dollars to the gold market could have a "substantial" effect on valuations. On the one hand, central banks, which have historically been net gold sellers, appear to be rethinking their portfolio strategies, and are diversifying their holdings into gold, Regent said.
Net officials sales of gold are sharply lower, and net buying in the last few quarters 'would seem to indicate a change in sentiment is clearly under way," he said. Secondly, investment demand for the metal has grown significantly, as investors seek gold's security as a hedge against future inflation or currency debasement.
Worries about unprecedented levels of government debt outstanding, ongoing global imbalances and the concerns countries have over excess US dollar reserves, combined with risk aversion over escalating sovereign credit worries in Europe, "position gold to benefit, as investors and central banks look for alternatives to the major currencies of the world", Regent said.
