Paul Brink, president and COO of Franco-Nevada, says gold is most correlated right now to interest rates, not the US dollar.
With the gold price near US$1,700 per ounce, Paul Brink, president and COO of Franco-Nevada (TSX:FNV,NYSE:FNV), offered his perspective on where the space is at.
“I think the gold market is in a good place. This gold market reminds me of the last bull cycle,” he said at the Prospectors & Developers Association of Canada (PDAC) convention.
“What’s going on currently in the world (is) we have a lot of risk from the coronavirus (and) the likely impact is it causes a slowdown in world economies. And the central bank response no doubt is to reduce rates — we’ve seen that already this morning,” Brink continued. He was speaking the day the US Federal Reserve announced an emergency interest rate cut of half a percentage point.
“When you look at the gold price, the gold price typically moves counter to the US dollar, but actually in the last couple of years the biggest correlation to the gold price has been rates,” he explained on the sidelines of the show. “When rates move down, the gold price moves up. So this is a very constructive environment for the gold price, and gold stocks are doing very well.”
Speaking about how Franco-Nevada has positioned itself in the current environment, Brink said that the major royalty and streaming company has focused on sticking to a specific strategy.
“In having a long-term investment strategy in the market the key is you want to spend most of your capital at the bottom of the market, and you need to be very disciplined when you start getting closer to the top,” he said, mentioning the opportunities the company enjoyed in 2015.
“We’ve spent over US$1.2 billion of capital in the gold sector in the last three years, and we’ve put our growth in place in the company. So the next four or five years we’ve got good growth,” he said.
“We’re really in a position where we don’t need to acquire anything, to add more growth. We really can be disciplined as the market gets hotter here. If they’re great assets we’d love to add them. But we’re not forced to add growth at the top of the market.”
Watch the interview above for more from Brink on gold and how Franco-Nevada operates. You can also click here for our full PDAC playlist.
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.