Bullion will rise after ‘sugar high’: analyst

Commodities conference this week.

Christian doesn’t believe Trump will be a major infrastructure investor and instead will focus on easy-topass tax cuts for corporations and wealthy people, which are more likely to reinvest the gains in the stock market rather than spending in the economy.

That will send the U.S. stock market higher and attract more foreign investors, bidding the dollar up as well. Investors will be focused on the U.S. stock market and greenback for at least the first half of 2017 at the expense of gold, he projected.

“That will reduce real growth in other parts of the world while not really stimulating real growth in the United States,” he said. “From a longer-term perspective it’s detrimental for real economic growth and it burgeons the U.S. debt and deficit, so on a long-term basis it’s more positive for gold.”

Christian believes bullion prices will hit US$1,300 to US$1,340 by the end of the year and reach new record highs of US$2,000 within the next decade. To support his bullish gold thesis, Christian pointed to three major trends in the gold market.

The first two factors are demand-side influences. Because of long-term economic uncertainty, investment demand for gold will return to between 30 and 40 million ounces per year, levels not seen since 2005, he projects.

Meanwhile, central banks will likely continue their desire to buy between 9 and 10 million ounces per year, but that could get more difficult as private investors bid the price up, Christian said.

And just as demand peaks, mine production will fall. He believes supply will plateau in the next three years and begin to drop off in 2020, due to a lack of investment in exploration and expansion.

“The reason we’re not finding things is because we’re spending one-seventh as much money as we were in the early ’90s,” he said. “The problem is not that the properties are not out there to be discovered, the problem is we’re not looking for them.”