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The Fed will get more hawkish, but cannot cool inflation; Why $5K gold is coming - Rob McEwen

Kitco News

(Kitco News) - The Federal Reserve is expected to turn more hawkish. Markets are pricing in a 75 bps increase at the next FOMC meeting, as opposed to a 50 bps rise.

Rob McEwen, Chairman and Chief Owner of McEwen Mining Corp, agrees with the market's sentiment. However, even with more rate hikes and quantitative tightening, he does not think the Fed can tame inflation, barring a Volcker-like approach.

In the 1970s-80s period of double-digit inflation, Fed Chairman Paul Volcker raised interest rates to 20 percent, bringing down inflation.

"The horse is already out of the barn," said McEwen. "[The Fed] has created a monster with monetary expansion and low interest rates. It's going to take quite a while to tame that."

Amid this economic turmoil, he sees opportunity in gold.

McEwen spoke with Michelle Makori, Editor-in-Chief and Lead Anchor at Kitco News, at the PDAC Convention in Toronto.

The Fed will send a 'chill' through markets

The Federal Reserve's anticipated rate hikes will "chill the real estate market further," said McEwen. "The speculative stocks and cryptos are already reflecting it."

At the time of this writing, the S&P 500 was down 22 percent year-to-date, and the crypto industry had shed more than $1 trillion worth of value.

McEwen does not foresee a soft landing. "I think the Russians use the term 'soft landing' for their astronauts coming back to Earth hitting not water, but hitting land," he explained. "We're moving in that direction, of a harder landing… We will be looking at a major market correction within the next year or two."

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What happens to gold

Gold's price has fallen by 0.75 percent, year-to-date. Although the precious metal has not lost much value compared to other assets, such as stocks and cryptocurrencies, investors wonder when gold's price will rise.

Responding to this, McEwen said, "It takes time for people to shift from a belief that everything's getting bigger and better, to 'oh, maybe I have to protect something.' And then the gold starts moving… I think we have to see more stress in the system and people looking and saying there's not many other avenues to go."

He added that he predicts $5,000 per oz gold in the next "two to three years."

"Look at Amazon, look at Shopify, look at a lot of the tech stocks," he said. "When the market suddenly decided to get in, [those stocks] exploded in value. Why shouldn't gold and nickel and other metals not do the same? It's just a rotation in the market from one sector to another… When suddenly the mood shifts, and it becomes less optimistic, then you ask, 'How do I preserve what I have?' And gold has fulfilled that function over millennia."

To find out about McEwen's new copper projects and his outlook for copper, watch the above video.

Follow Michelle Makori on Twitter: @MichelleMakori

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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.