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Sheep flock to gold
Directly following Britain’s vote to leave the European Union, for example, the price of gold reached its highest level in two years, closing at $1,320 US an ounce, up $58.80 on that day.
“When there’s instability in the world, everybody, it’s like a herd of sheep, they just flock to gold,” said Van Rijk.
RBC Capital Markets released a report in July forecasting the price of gold will reach $1,500 US an ounce by 2017, a value it hasn’t seen in three years.
The report’s authors are anticipating this higher price “as investors look to gold as a safe haven investment” at a time of geopolitical uncertainty and ultra-low interest rates.
Glowing through the ages,our infatuation with gold dates back to ancient civilizations.
According to the World Gold Council, the first gold coins were created around 550 BC. Gold was used as currency in many countries before an eventual switch to paper money.
“Gold is scarce, it doesn’t corrode, it’s got these magical qualities that people prize, the ancient Egyptians loved it, the Romans loved it,” said Eric Kirzner, who teaches finance at the University of Toronto.
“It wouldn’t be a bad idea to allocate on a permanent basis about five per cent to gold. The best way might be in the form of gold mining companies rather than gold, where you are getting some industrial exposure as well,” said Kirzner.
“We started to see investors call us August of last year, and these were people who hadn’t owned gold or hadn’t owned gold stocks for four or five years,” said Sean Boyd, vice-chairman and CEO of Canadian mining company Agnico Eagle.
Boyd’s company, which has been around for almost 60 years, has nine mines in Ontario, Quebec, Mexico and Finland that produce about 1.6 million ounces of gold a year. Boyd, of course, sees gold as a positive long-term investment.
“It’s demonstrated to be a good thing to have over the last few years,” said Boyd.
He admits he gets excited when the price of gold goes up, but too often he sees those who work in the gold mining industry falling into the boom-and-bust trap.
“When things are going particularly well they over-invest, they overspend, they do bad acquisitions. When things are not doing particularly well in the gold price they panic. They cut too many employees, they cut back on drilling. We tend to have worked opposite to that,” said Boyd.
When the price of gold was dropping in 2013, Boyd’s company was increasing exploration spending, buying investments in junior companies and buying deposits, growing their company by 60 per cent over the last five years.
“Gold can be volatile, so we’ve been in the business for a long time, you try to put that to the side,” said Boyd.