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Gold should be at the top of every investors' list - CRU

Kitco News

(Kitco News) - On an investment spectrum gold is at the top of the list, energy commodities at the bottom and base metals somewhere in the middle, according to one research firm.

Paul Robinson, managing director at CRU

On the sidelines of the Prospectors and Developers Association of Canada Conference 2020 in Toronto, Canada, Paul Robinson, managing director at CRU said that even after the recent disappointing price action in gold, it remains an important safe-haven asset for investors.

“It’s about capital reservation and that is what gold has going for it,” he said. “Gold will continue to rally with all this uncertainty in the marketplace.”

In the near-term, Robinson said that gold has room to move higher as fear sentiment surrounding the spread of the coronavirus has yet to reach its peak in Europe and North America. He said that it is only a matter of time before that happens as the virus is currently spreading through Asia.

Robinson said that he expects to see higher gold prices through 2020 as markets move towards peak fear sentiment.

“Up until now, the virus spread has been more of an outside even for investors in Europe and in North America but that could soon change,” he said.

Wednesday, California issued a state of emergency because of the spreading coronavirus, which has seen steady growth in the U.S. According to media reports there are now a 129 confirmed cases in the U.S. and 11 citizens have died as a result of the virus

Although Robinson is bullish on gold as a safe-haven commodity, he said that it is a little more cautious on the outlook for the for mining sector. Robinson said miners has to get through the latest turmoil caused by the global spread of the coronavirus.

“Overall the coronavirus is bad for the mining sector. The virus is impacting demand, which will ultimately impact supply,” he said.

Although gold miners are expected to enjoy higher margins and improved cash flows, Robinson said that base metal miners could suffer as the spread of the virus has created massive demand destruction in the marketplace.

“The question we still don’t know is if we have seen massive permanent demand destruction or has demand simply been delayed. I think we will only know that in a few months,” he said.

The question market experts are trying to determine is just how bad the impact the virus will have on consumer demand and if government intervention can change sentiment. Robinson said that if the virus can be contained in the first half of the year there is an opportunity for copper demand to pick up in the second half of the year.

“Right now markets are reacting to the uncertainty in the marketplace rather than the reality of the situation,” he. “2019 was the first time in at least in a decade where we had global commodity demand contraction in many different commodities.”

Out of all the commodities, Robinson said that he is most bearish on energy commodities as that sector has seen significant demand destruction as fewer people take trips.

“Any commodity that deals with transportation should be at the bottom of the list for investors,” he said.

Looking past short-term volatility of the coronavirus, Robinson said that his firm sees solid fundamental support for gold prices for the next two or three years. Along with strong investment and consumer demand, he explained that dwindling supply will help keep a bid under gold.

Robinson said reiterated his stance that falling mine supply will also continue to drive merger and acquisition activity through 2020.

“Right now miners are running out of supply and the fastest way they can replace those ounces is through acquisitions and further consolidation,” he said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.