Yamana Gold Inc. Chairman and founder Peter Marrone shared his views on the gold market. Marrone says we’re on the verge of a “stagnation” with some “stagflation” feeding the perfect storm for the gold price to rise.
“We haven’t seen the all-time high gold price yet”
Peter Marrone shared his views on the gold market at the PDAC 2022 convention in Toronto. Evaluating the current situation, Marrone comments:
It is difficult for me to predict the gold price in terms of precision and certainly the timeframe. But back to first principles. I don’t believe we’ve seen the all-time high gold price.
Is history repeating itself for yellow metal?
The Yamana Gold President notes that there are parallels between 1980, the year of high stagflation, and 2022. He says history can be a guide to the future of the price of gold. In this context, he makes the following statement:
In 1980, we were in a recession in the middle of a period of inflation. We were in the middle of a war. There was an invasion of Afghanistan by the Russians. The Americans called the Russians the “Evil Empire”. There are so many similarities in the world today to what happened then.
With high inflation, an impending recession, and the war in Ukraine, recent events are similar to what happened in 1980, Marrone suggests. He explains his view as follows:
In the context of what’s going on in 1980, the price of gold reached about $840. In terms of adjusted dollars, what does $840 mean today? This number is roughly $2,700 to $2,800. And I definitely think it’s an excellent opportunity for the gold price to rise to these levels again.
Peter Marrone: We’re on the verge of a perfect storm!
cryptocoin.com As you can follow, the Federal Reserve recently increased interest rates by 75 bps. Still, Marrone says this isn’t enough to curb inflation and the Fed may take more hawkish moves. Marrone makes the following assessment on the subject:
There is very little that central banks can do about supply chain cuts, which is one of the causes of this inflation pressure. Worldwide debt is at unprecedented levels. And economies around the world are shrinking. It seems to me that we are in this perfect storm where it is becoming very difficult for central banks, including the Fed, to raise interest rates to a level that will tame inflation. At some point they probably have to pull back or conclude that inflationary pressures are here to stay longer than expected.
Gold mining costs
Marrone says his company, Yamana Gold, has been relatively insulated from recent economic pressures, including rising fuel costs and geopolitical tensions. He explains it this way:
We are not very dependent on diesel. It represents 5-6% of our total costs. Therefore, we produce more while experiencing some inflationary pressure on some inputs. This means our total cost per ounce is lower.
As for the Russia-Ukraine conflict, Marrone said, “We are not facing any difficulties. We don’t have a supply from that part of the world. That’s why we’re so isolated in terms of our operations in America,” he says.
