Gold just hit another record high and a gold mining CEO says these are the reasons why

Despite gold’s recent jump, it’s still been a worse investment this year than the S&P 500

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A resident digs and sifts sand to look for gold on March 23, 2017 in Paracale, Philippines. In the mining town of Paracale, about 350 kilometers south of Manila, a day's work of digging and sifting through hundreds of kilos of sand and clay, an artisanal miner can gather about a quarter of a gram of gold dust, enough to earn $5, enough for a family to go through the day's needs. For decades, local residents at Paracale town work in hazardous conditions scavenging under the earth and diving into tunnels filled with mud using only makeshift tools to mine for gold, often placing their health and lives at risk. Ban Toxics, a local NGO working at these sites claims that artisanal mining is a poverty driven industry and that small-scale miners typically work in harsh conditions with no proper training, protection, and pollution control methods. Local reports indicated the country produced about 18 tons of gold at a market value of over $700 million in 2014 while 80% of the gold comes from artisanal and small-scale mines which operate without a government license. The Philippines holds the largest copper-gold deposit in the world and is the fifth most mineral-rich country for gold, nickel, copper, and chromite, but massive environmental destruction prompted the new Department of Environment and Natural Resources secretary, Gina Lopez, to threaten many large-scale mining operations for closure.
A piece of gold held by a resident of Paracale, Philippines, where miners often brave hazardous conditions to retrieve small amounts of the precious metal.
Photo: Jes Aznar (Getty Images)

Gold is hard to pin down. It means a lot of different things to a lot of different people. But it’s desirable and expensive, which has made a consistent fulcrum of financial speculation for centuries. Even Costco is trying to get in on the action by selling gold bars alongside cheap hotdogs and giant boxes of household goods. In fact, Bitcoin has long been thought of a sort of digital parallel to gold, with all the same animal spirits driving it. But as the precious metal hits a new record — it’s at nearly $2,200 a troy ounce in Thursday trading — investors could be forgiven for trying to find a reason for its continued rise.

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But why?

Enter Jonathan Awde, president and CEO of Dakota Gold Corp. At a recent small-cap stock investing conference put on this week by the equity research firm Sidoti & Company, he took a moment to lay out all the reasons that he thought gold was doing so well lately:

🟡 “Over the last couple of years, you’ve seen record central bank buying. You’ve really seen a couple of key shifts happening. You’ve seen this dedollarization shift where a lot of countries are looking to settle transactions in something other than U.S. dollars.”

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🟡 “You’re seeing this move from West to East, where historically speaking, a lot of Western countries have been countries were gold was stored. And this is now changing because of what happened with Russia and Ukraine. The U.S. imposing sanctions on Russia. A lot of countries are saying, all right, we’ve seen your playbook. We don’t want to have gold stored in other countries. We want to have gold stored in our own country. So in case we have or do something that goes against your foreign policy, we don’t have our gold confiscated.”

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🟡 “You know, the U.S. government is running at an unsustainable pace of $2.5 trillion to $3 trillion annually in deficits, almost $1 trillion on military, and close to $1 trillion a year on interest payments to service the debt. So at some point, this is not sustainable.”

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🟡 “I think the U.S. dollar will also get ahead and historically has an inverse relationship with gold. So I think the setup is there and I think it’s a really interesting time to be looking at gold if you currently have no exposure.”

There you have it. Of course, these are the kinds of fear-driven talking points that have long been a part of the sales pitch for gold — especially gold coins. But the market is the market. Funny enough, despite gold’s recent jump, it’s still been a worse investment this year than the S&P 500.

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