Turning to gold in terms of inflation protection could push it to $3,000 an ounce within a few month

One by one, commodity prices from aluminium to natural gas rose sharply as pandemic aftershocks disrupted supply chains. Gold could be next, albeit for very different reasons.

This is the view of two of the biggest names in the Canadian mining industry - former Goldcorp Inc. executives David Garofalo and Rob McEwen - who predict that investors will soon realise that global inflationary pressures are less temporary and more intense than central banks and consumer price indices suggest.

When that realisation begins, gold's call for inflation protection is likely to push prices up to $3,000 an ounce, from about $1,800 now, according to Garofalo, who ran Goldcorp before it was gobbled up by Newmont Corp. and now heads Gold Royalty Corp. The run-up would be a "down payment" for McIven's long-term projection of $5,000.


Unsurprisingly, gold executives have an optimistic outlook for bullion investments. But they don't often predict such dramatic growth in such a short time. If other metals are any indication, gold's rally, when it happens, will be dramatic, Garofalo said in an interview Friday with McEwen.

"I'm talking months," he said. "The reaction is usually immediate and violent when it happens. That's why I'm quite confident that gold will reach $3,000 an ounce in months, not years."

Global monetary and debt expansion to deal with the pandemic, as well as secondary factors related to supply disruptions, will force people back to traditional methods of protecting wealth, said McIven, founder and former chairman of Goldcorp, which now runs its namesake mining industry. and is a shareholder in one of the companies Gold Royalty is buying.

"It's not just about the dollar," he said. "All currencies are buying less than they were buying a year ago. So I think this is an unprecedented development, at least in our lifetimes, that will affect the value of fiat currencies around the world."

Its versatility and 4,000-year history means that gold is better than cryptocurrencies as protection against an inflationary environment that "will have a profound and meaningful impact on our capital," Garofalo said.

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Encouraging a deal

Inflation also pervades the gold mining industry, labour and resource shortages arise and costs rise. He said this creates another incentive for mid-sized producers to seek savings through mergers and acquisitions after years of underinvestment led to a reduction in reserves.

Garofalo said another market segment ripe for further consolidation is licence companies that offer upfront payments in exchange for the right to a percentage of production or revenue. His company Gold Royalty went public earlier this year and announced three takeovers, including Abitibi Royalties Inc. and Golden Valley Mines & Royalties Ltd.