Like dozens of other steadfast bulls at this week’s Denver Gold Forum, Royal Gold chief executive Tony Jensen isn’t worried much about the precious metal’s 20-percent-plus drop this year after hitting record highs.
He foresees a long-term increase in gold prices based on strong international demand, weak supply growth and continued problems for the U.S. economy.
Promising fundamentals for gold were a chief reason Denver-based Royal Gold spent $150 million in cash last month to acquire a major royalty interest from mining giant Barrick Gold Corp.
“Our headline is growth and diversification,” said Jensen, who made a presentation on his firm Tuesday to mining analysts at the Denver Gold Forum, one of the industry’s largest gatherings. “We’re longterm believers in gold prices.”
Royal Gold purchases royalty interests from gold-mining firms, allowing it to generate income on gold production without engaging in mining itself.
Gold on Tuesday dropped to its lowest level since November, down $10.50 to $792 an ounce on the New York Mercantile Exchange. Analysts said falling petroleum prices and a stronger U.S. dollar have reduced demand for gold as a hedge against inflation.
Those phenomena, Jensen maintains, are temporary, while factors such as demand for gold in jewelry and decreasing worldwide gold production are enduring factors that will move prices back up.
In the meantime, gold-mining stocks have been hit hard. Royal Gold fell $2.20 Tuesday to $27.54 and is down 9.8 percent this year.
Edward Dowling, CEO of Lakewood-based Anatolia Minerals, described market reaction to falling gold prices as “irrational unexuberance,” a twist on a phrase by former Fed chief Alan Greenspan. “The panic has overwhelmed fundamentals,” Dowling said.
Steve Raabe: 303-954-1948 or sraabe@denverpost.com
