Stock Gold Dubai jewellery
Stock Gold Dubai jewellery Shoppers buying gold jewellery in Dubai Image Credit: Virendra Saklani/Gulf News

Gold prices will hold firm this year, if not rise, opined the world's second-biggest gold miner, while expressing confidence that investors will use the metal rather than cryptocurrencies to hedge against inflation as jewellery demand picks up worldwide.

"The risk is on the upside (which means there is more risk for prices to go higher)," said Mark Bristow, chief executive of Canada-based Barrick Gold Corp. said in an interview in Riyadh, Saudi Arabia. "I don't think there's very much risk on the downside (i.e. chances for prices to go lower is higher)."

The mostly likely scenario is that gold trades between $1,750 and slightly above $1,800 an ounce, he said. Spot bullion gained 0.4 per cent to $1,809, paring its loss this year to 1.1 per cent.

Bristow, a geologist who's lead Barrick since early 2019, is more bullish (hopeful prices will gain) than analysts, many of who forecast gold will drop as the US central bank raises interest rates this year. Its price will average $1,683 per ounce in the fourth quarter, according to a Bloomberg survey of analysts and economists.

Gold's status as a store of value when inflation accelerates has taken hit since the coronavirus pandemic struck. Bullion faces growing competition from Bitcoin and other cryptocurrencies.

Gold versus cryptocurrencies

Gold's status as a store of value when inflation accelerates has taken hit since the coronavirus pandemic struck. The metal fell 3.6 per cent in 2021 even as inflation rates across the developed world soared with governments and central banks keeping fiscal and monetary policies loose to stimulate their economies.

Bullion faces growing competition from Bitcoin and other cryptocurrencies that are increasingly pitched to investors as a modern-day gold and an effective hedge against inflation. US-based Goldman Sachs Group Inc. argued that Bitcoin is taking market share from gold as a store-of-value investment.

"Look at gold and its precious nature - you can't print it and you can't make it," Bristow said. "You can make cryptocurrencies, and there are many of them. When you're in a dynamic phase like we're in now and the world's uncertain, it's always good for gold."

Bristow is in Riyadh to attend Saudi Arabia's first major mining conference. The Toronto-based company digs up copper in the east of the kingdom in a joint venture with the state miner Maaden.

Gold prices back on the mend

Gold back on the mend

"Pullback in both the US dollar and 10-year treasury yields are supporting gold prices, but the fact that markets are still seeing three to four interest rate hikes this year is limiting the upside potential," said Margaret Yang, a strategist at DailyFX. The yield on 10-year Treasury notes inched away from an almost two-year high of 1.808 per cent to about 1.757 per cent.

Gold is considered a hedge against high inflation, but the metal is highly sensitive to rising US interest rates which increase the opportunity cost of holding non-yielding bullion.

Goldman Sachs now expects the US central bank to raise interest rates four times this year, matching the view of analysts at top global lenders J.P. Morgan and Deutsche Bank. The US dollar eased against a basket of currencies as traders looked to incumbent Fed Chairman Jerome Powell's nomination hearing later in the day for new clues on the timing and pace of policy normalisation.

"Markets are seeing 5.4 per cent year-on-year growth in core inflation and if numbers surpass this forecast, we may see the dollar moving up even higher and gold prices dropping. However, if the inflation rate comes below expectation, that may provide some relief for gold," Yang said.

US core CPI is expected to have risen by an annual 5.4 per cent in December, up from 4.9 per cent in the prior month, which could stress the need for earlier-than-anticipated rate hikes by the Fed. Spot silver was up 0.5 per cent to $22.57 an ounce, platinum gained 0.8 per cent to $947.41, and palladium rose 1.2% to $1,934.75.