Evolution Mining boss Jake Klein sees $US2000/oz gold price in a year

Evolution Mining boss Jake Klein has made a bold prediction that the gold price will be “materially higher” in a year’s time, suggesting a price of at least $US2000 an ounce.

Speaking on day one of the annual Diggers and Dealers Mining Forum in Kalgoorlie, Mr Klein said he believed his prediction would become “reasonably obvious and predictable” in retrospect.

He noted the global economy had experienced incredible prosperity since the early 1990s with globalisation opening up new cheap labour supply, technological advances resulting in higher productivity and a debt super-cycle keeping consumers happy.

“Every time the economy slowed, central banks were able to pivot and reduce rates quickly to support growth,” he said.

“This has been even more the case since the 2008 financial crisis, when inflation cratered and allowed central banks to turbocharge monetary policy, cut interest rates to negative levels and pump unlimited money into the system.”

He noted US inflation rates were now at 40-year highs while unemployment rates were at historic lows.

“McDonalds is paying a $1000 sign-on bonus to get staff in the door to flip burgers and parts of our industry is paying ten times that to get people to their sites,” he said.

“The Fed, which in large part was the cause of this outcome, has now declared inflation public enemy number one.

“While confidence in the Fed has been shaken, it does remain inexplicably strong. Investors have demonstrated this by taking the US dollar to historic highs, so fundamentally we are trusting the institution that created this mess to resolve it.

“As one smart economist said inflation is like toothpaste, once it’s out of the tube, you cannot get it back in.

“So when investors realise that the Fed and other central banks are not going to be able to fix this, they will again recognise the need for gold and turn to the insurance that gold offers.”

Despite Mr Klein’s commentary the gold price has trended lower since March and is well off the record high of $US2074/oz it hit in August 2020 as the global pandemic raged.

Mr Klein said he believed “liquidity contraction” was the reason the gold price hadn’t already risen sharply in response to the macro-environment.

People were looking to sell what they could sell before resetting and re-allocating their investment dollars, he said.

He noted the gold price had rallied $US50/oz on the slightest hesitation in the resolve of US Fed chairman Jerome Powell’s to tackle inflation in the past week.

But he said the gold sector faced stronger competition in attracting investment and needed to increasingly appeal to generalist investors who were not specialists in the field.

“We will only do this by demonstrating that over the long term the rate of return that we can generate on our shareholders’ capital is competitive with other sectors and worthy of allocation of those investment dollars,” Mr Klein said.

“I do believe that with the right approach, we can do this.”