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Gold price has much more upside than downside risk, says Barrick CEO

In the wake of gold’s recent rally to a new record high, the world’s second-largest gold miner predicts that the yellow metal has much more upside than downside risk looking forward.

In an interview with the Financial Post on Monday, Barrick Gold chief executive Mark Bristow said that the market is underestimating the damages Western central banks’ tightening cycles have done to their respective economies.

In the United States, for example, Bristow said that there is simply no fiscal discipline. “People have gotten used to free money. It’s going to be hard to tighten things up,” he said.

“I am a great believer in the US economy, but, wow, I have seen some very undisciplined approaches from both the Republicans and the Democrats on how they managed their fiscal policy,” Bristow told the FP.

Barrick’s CEO believes that people are living off a “decade of free money”, including money printing during the covid pandemic, and what we are measuring now is the impact of that devaluation. This, he says, is the main reason why gold prices have continued to rise over the past five years.

“When you print money, it’s like printing shares in a company. If you print shares in a company and you don’t add more value, then the value of the shares goes down. And so when you print piles of fresh money and your economy doesn’t grow, the value of that money becomes risky.”

Alternatively, gold becomes more valuable and less risky. “You buy it to preserve your wealth, because you don’t trust (the economy), and that’s also why there’s signs of crypto getting some revival, although I don’t believe in that. But if you look at 2023, gold has outperformed all the other asset classes,” he said in the FP interview.

As a result, Bristow sees the demand for the asset continuing to rise, offering support for gold prices along with supply concerns.

“To add to that, the gold mining industry hasn’t replaced the gold we have mined. We have used the higher gold prices to unlock lower-grade reserves, but in the past 2.5 years, with the flat rate and then inflation, we have seen that margin in the mining industry shrink,” he said.

“And that’s why we need to find more gold.”

By 14:22 p.m. ET, spot gold has declined by 1.1% to $1,981.63 per ounce, with robust US economic data underpinning a rebound in the dollar. US gold futures fell 0.8% to $1,997.60 per ounce.