Gold's importance as an asset class will continue over the long term, but expect short term volatility in a world of immense geopolitical and financial uncertainty that has "completely wrong-footed financial markets", Evolution Mining said on Thursday.
Gold responded to the British vote to leave the European Union (Brexit) as expected, surging to a two year high as investors fled to safe haven assets. The election of Donald Trump to the U.S. presidency was "entirely different", Evolution's executive chairman Jake Klein told the company's Annual General Meeting in Sydney on Thursday.
The precious metal hit a two-year high of 1,366.30 U.S. dollars per ounce in early July as the Brexit fallout continued, however it has been traded in a wide, volatile range ever since, hitting levels as low as 1250 U.S. dollars per ounce prior to Trump's election.
Though the immediate aftermath of the Nov. 2 election saw gold stocks rally, it has subsequently slumped to trade at 1,188.27 U.S. dollars per ounce by 1122 local time (AEDT) on Thursday.
"Markets have cheered on the Trump victory in anticipation of stimulatory economic policy in the form of reduced regulation, lower corporate taxes and potentially trillions of dollars of fiscal stimulus through infrastructure spending without any immediate concerns around the inflationary effect of these policies," Klein said.
"We are likely to experience continued volatility in the gold price over the short to medium term."
The targeted stimulus should boost U.S. productivity, incomes and inflation in the long-term leading to an even higher greenback and an increased pace in U.S. Federal Reserve tightening, making bonds attractive.
Analysts now expect a new round of targeted fiscal stimulus in other developed economies to match potential Trump moves as experimental monetary policy has not worked.
"Gold looked like a great investment when we saw an ever increasing world of negative yielding interest rates," IG chief market strategist Chris Weston said in a note to clients on Thursday.
"But, given the level of outstanding bonds with a negative yield has almost halved (now $7.6 trillion) since Trump was elected, the fact gold has no yield makes it less attractive on a relative basis."
Klein said they will weather the volatility with their platform of high quality assets, affirming production guidance at 800,000 to 860,000 ounces in fiscal 2017 for an all in sustaining cost between 900 Australian dollars (663.29 U.S. dollars) to 960 Australian dollars (707.87 U.S. dollars) per ounce.
"Our balance sheet is strong, our assets are generating substantial cash flow and our business is well positioned for the future," Klein said.