Evolution Mining executive chair Jake Klein believes the gold industry has nothing to be concerned about despite the commodity’s recent price regression.
According to the World Gold Council, gold was trading hands at $US1882.35 ($2689) on Friday, slipping back from its recent highs which saw the commodity rise above $US2000 ($2857) per ounce in March.
It comes after the Federal Reserve (the Fed) raised interest rates by 50 basis points last Wednesday, the most since May 2022. US Treasury yields rose and a firm US dollar pressured demand for the greenback-priced bullion.
This left gold in the dust, for the time being at least.
“All eyes are on the Fed at the moment,” Klein told Bloomberg at the 2022 Macquarie Australia Conference last week.
“If you go back 60 days, gold was flirting with $US2000 per ounce and went higher than that and now it’s retreated on the basis that the Fed is going to be very hawkish … I’m optimistic about gold in the medium-to-longer-term.”
The Reserve Bank of Australia (RBA) did the same as the Fed, increasing interest rates by 25 basis points to 35 basis points last week. This was a 11-year first for Australia.
Klein said the RBA was facing similar difficulties to other economies around the world.
“I think they (the RBA) are signalling the same thing as the Fed; they’ve got the same challenge,” he said.
“These economies have low unemployment at the moment, they have very high inflation and to balance that and to land that and to raise interest rates without putting the economy into recession, has not been done very often before.
“In fact, to me it’s an impossible challenge and hence why I think investors should have an exposure to gold, because the likelihood of them overshooting inflation … means that you should have an exposure to gold.”
Evolution was trading at $3.67 on Monday, down 3.67 per cent on the day.