John Hathaway, Senior Portfolio Manager at Sprott Asset Management, believes that reaching $3,000 per ounce for gold within the next year is feasible given the current economic and geopolitical landscape. In an interview with Bloor Street Capital’s Jimmy Connor, Hathaway emphasized the profound implications such a price rise would have on mining stocks, which he argues are undervalued due to the dominance of tech stocks in the equity market.
Hathaway noted a disconnect between mainstream investor comfort levels and the potential of gold mining stocks. He suggested that as investors reconsider their positions in crowded tech investments, they may turn to the overlooked opportunities in precious metals.
Discussing the Federal Reserve’s monetary policy, Hathaway expressed concerns that overly tight policies could lead to a recession, questioning why gold miners still trade at historical discounts relative to the metal’s price.
“There’s been limited recognition of how record gold prices translate into mining company earnings and cash flow,” Hathaway observed. “This disconnect offers a significant mean reversion opportunity for mining stocks, especially if gold prices sustain at current levels or move higher.”
Hathaway dismissed concerns about the sustainability of central bank gold buying, attributing it to a shift in global trade dynamics among BRICS nations. He highlighted that these nations increasingly settle trade in gold rather than U.S. dollars, reflecting a strategic shift away from dollar dependence.
“I don’t view current gold prices as a bubble fueled by speculative buying,” Hathaway asserted. “Rather, it’s a reflection of gold’s evolving role as a neutral reserve asset in international trade, distinct from the volatility seen in financial markets.”
When asked about investor positioning amidst geopolitical risks and economic challenges, Hathaway recommended increasing exposure to gold and related assets. He suggested that the current underweighting of gold among U.S. financial advisers presents an opportunity for investors to reevaluate their portfolios.
“In the event of an economic slowdown, which I anticipate, there could be a significant reevaluation of investment strategies,” Hathaway stated. “This could drive gold prices up by 15-20%, not an unreasonable scenario considering current circumstances.”
Regarding the implications for mining stocks, Hathaway underscored their potential for substantial gains if gold reaches $3,000, emphasizing their current undervaluation relative to earnings potential.
“While this outlook may not be widely accepted now, I believe it’s prudent for investors to consider reallocating toward gold and mining stocks amidst uncertain economic conditions,” Hathaway concluded. “This strategic shift could prove beneficial if current market trends persist.”
