Gold veteran says Brexit may be start of 'major bull market'

[SINGAPORE] Gold may stand at the start of a major bull market should the UK's Brexit vote prove to be a forerunner of greater political and financial instability around the world, according to Evolution Mining Ltd's Jake Klein, a veteran of more than 20 years in the industry.

With the rise in uncertainty, investors are coming back to the market, the executive chairman of Australia's second-biggest producer said in an interview with Bloomberg Television.

"It is an alternate currency, it's performed that role" as a haven for over 2,000 years, he said.

Gold has soared after the UK's vote last week to quit the European Union as investors seek a haven from financial turmoil and contemplate the possible implications. The vote threatens to fragment the world's largest trading bloc should Britain withdraw, while also calling into question the future of the United Kingdom, with the possibility of Scottish independence. Former Federal Reserve Chairman Alan Greenspan said Northern Ireland may also break away.

"I guess to me, the most interesting thing is: are we seeing the first fault lines of a major correction and change in the financial and political systems?" he said. "If that's the case, then we could very well be at the early stages of a major bull market."

Gold for immediate delivery rallied as much as 8.1 per cent on Friday as poll results came in. The metal, which traded at US$1,316.75 at 2:52 pm in Singapore on Tuesday, peaked in 2011 at US$1,921.17. It's up 24 per cent in 2016 after gaining to the highest since 2014.

Gold miners have climbed, and holdings in exchange-traded funds have swelled further. Evolution rallied as much 19 per cent on Friday, while in Canada Barrick Gold Corp's stock closed on Monday at the highest since 2013. Global assets in ETFs expanded 32 per cent this year, rising 12.6 metric tons on Monday.

Higher Forecasts Banks have also been raising their forecasts for bullion. Morgan Stanley boosted its 2016 outlook by 8 per cent and 2017 view 13 per cent, according to a report received on Tuesday. Goldman Sachs Group Inc increased its three-, six- and 12-month targets by US$100, citing flight-to-safety sentiment.

Not everyone is convinced that bullion will prove to be the best bet. Veteran investor Jim Rogers told Bloomberg on Monday he'd rather seek haven in the dollar than gold, given that bullion had already rallied in 2016 before the vote. Prices have risen this year as the US Federal Reserve failed to add to last year's interest rate rise.

"We're obviously benefiting a lot from the gold price rise," Mr Klein said. "I would point out that gold is only over US$1,300 now, and in 2011, it was over US$1,900, so there's potentially still a long way to go. But certainly interest in gold, interest in gold stocks, and interest in Evolution is rising."

Mr Klein said that Evolution would focus on improving the quality of the company's portfolio, including investments, divestments and possible M&A opportunities. "We're not looking to expand our asset base to beyond six to eight assets we see as the optimal size," he said.

"Uncertainty and political instability is not something that I'm personally in favour of," said Mr Klein. "But from a gold investor perspective and a shareholder of Evolution perspective, it's certainly been very positive."

BLOOMBERG

For more coverage of the EU referendum, visit bt.sg/BrexiT