Gold price may be set to rise – but so are risks for miners

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Amid the frenzied analyses of supply, demand and spiking prices for green metals and critical minerals, another metal may be preparing to steal the spotlight: gold. 

While the price of gold spiked earlier this year to $2,068 per oz. (just shy of its August 2020 all-time high) on Russia’s invasion of Ukraine, it hasn’t stayed at those elevated levels. At press time Wednesday, the yellow metal was at a relatively modest $1,850 per oz., just a touch above where it began the year at $1,827.50 per oz. 

However, persistent inflation, rising recession risks, pandemic-stressed supply chains, the ongoing war in Ukraine (now entering 14 weeks), and covid-19 shutdowns in China are all contributing to extreme market volatility. That should have more investors turning to safe haven gold, which saw a 34% surge in demand in the first quarter compared with the same period of 2021, according to World Gold Council figures. 

In its annual “In Gold We Trust” report, released on May 24, Liechtenstein-based investment firm Incrementum AG highlights many of these risks facing investors and more, but its primary theme is denoted by its subtitle, “Stagflation 2.0.” The 392-page tome warns of the rising risk of stagflation, and notes that gold, silver and mining stocks have historically outperformed in stagflationary times — marked by a painful combination of high inflation, stagnant growth or economic contraction, and high unemployment. 

The last time the world saw a significant period of stagflation was in the 1970s and early 1980s.