Barrick Gold is the world’s largest gold producer. It got that way by being a conservative player. For the past 21 years it has locked in its revenue stream by hedging against the future price of gold. If gold fell like it did in the ‘80s and ‘90s, Barrick could absorb the loss by selling forward.
Today, Barrick said it was spending $5.6 billion to buy back all of its hedges. According to Bloomberg: “Barrick has ‘an increasingly positive outlook on the gold price,’ the company said in the statement. Gold today rose to the highest price since March 2008, topping $1,000 an ounce, as the slumping dollar and inflation concerns boosted the metal’s appeal to investors.”
When Barrick, the most successful gold company around, is going all in, that’s a positive outlook. But when Peter Schiff, a long-term friend of Taipan Publishing Group, and the man who wrote a book on the collapse of the U.S. housing market a year before it happened, says gold is going to $3,000, then I start to pay attention.
In a recent appearance with Fox Business News, Peter said:
We are in a major bull market, I think we are going a lot higher. The spot price of gold is still below 1,000 and I think you got the futures markets going above 1,000. But if you look at the ETF GLD, SPDR Gold Trust (ETF) it’s at 980 and in March of last year it briefly traded above a thousand. I think we are going through a 1,000 (...) we are going to have gold 2,000, gold 3,000, gold 4,000. Every time it hits another milestone we are going to have another party.
Gold going up is a response to the U.S. dollar falling, which is the same thing as inflation.
Bloomberg sums it up:
“Governments have cut interest rates and boosted spending to fight the worst recession since World War II, spurring investors to buy bullion as a hedge against the prospect of accelerating inflation and currency debasement. Gold, silver and palladium holdings in exchange-traded funds have reached records.”
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