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Gold is going to $2,000 in 12 months - VanEck's Joe Foster

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(Kitco News) - One fund manager is doubling down on his bullish outlook for gold, saying that prices could reach new record levels by next year.

In a video interview with Asset TV, Joe Foster, portfolio manager at VanEck, said that he sees gold prices going to $2,000 within 12 months as the world continues to react to massive stimulus measures taken to protect the global economy that has been rocked by the COVID-19 pandemic.

“In certain scenarios we could see gold go up much higher than that,” he said.

Foster said that he is bullish on gold as governments and central banks around the world are reacting to deflationary pandemic shock. He added that gold will continue to do well as financial markets deal with real negative interest rates.

Joe Foster, portfolio manager at VanEck
“We're going into a recession. We don't know how deep it will be or how long it will be. Debt is increasing. Governments are having massive increases in debt to raise the funds to get through this crisis. So, there's an awful lot of uncertainty in the market going forward,” he said. “Gold doesn't pay any interest, but with interest rates at zero or even negative in Europe and Japan, gold is now competitive with interest-bearing instruments.”

As gold prices are expected to push higher, Foster said that investors should keep an eye on mining stocks. He noted that the mining is one of the only sectors that is seeing rising commodity prices.

He added that a lot of the major producers are financially in good shape. He noted that at current prices around $1,700 an ounce, gold producers are seeing massive margins and free cash flow of around $400 to $500 an ounce.

“On average, the net debt to EBITDA of the gold industry is about one fifth of the debt ratios of the S&P 500,” he said. “We've seen two companies increase their dividends in the midst of this crisis, and we expect more companies to continue increasing dividends once all the mines are back online. Contrast that with many other industries that are struggling and will continue to struggle for the foreseeable future.”

The comments come as the gold sector sees earnings calls from major producers this week. Tuesday, Newmont Corp, the world’s biggest gold producer, said that it saw “solid” earnings in the first quarter.

The company said that it produced 1.5 million attributable ounces of gold between January and March.

Wednesday, Barick Gold, the second largest gold producer in the world, will release its earnings before the North American equity market open.

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