Gold miners look past Fed headwind to stay upbeat

Danielle Bochove, Millie Munshi and Luzi Ann Javier

BLOOMBERGDENVER/NEW YOR

Not even the prospect of the Federal Reserve raising interest rates is enough to crush gold executives" enthusiasm.

Prices will reach USS1,385.63 an ounce by the end of the year, according to the average estimate in a survey of 16 participants at the Denver Gold Forum, the 27* annual -gathering of mining executives, hedge . funds, bankers and analysts that attracted more than 1,100 attendees. The forecast is 4.1 percent above Wednesdays closing futures price.

Investors piled into gold in the first half of the year as yields fell below zero on more than S8 trillion of government debt in developed markets. Most survey participants saidthe Federal Reserves interest-rate policy will continue to be the driving factor for the metal, which benefits as a store of value when borrowing costs are low. The other big ques-tions oathe minds of gold watchers are the US election and the stability of the global economy.

"IVe never seen a circumstance when so many different types of people and entities are buying gold," mining executive Randall Oliph-ant, the chairman of the World Gold Council, said in an interview in Colorado Springs. "Everyone is trying to figure out, what do negative interest rates mean?"

Gold had the best first half in almost four decades, rallying 25 percent, as the Fed held off on further rate increases and other central banks boosted stimulus to support growth. While gains this quarterslowed to just up 0.8 percent, the metal remains attractive. Investors poured S249 million into exchange-traded funds backed by precious metals over the past week, helping keep holdings in gold-backed ETFs near a three-year high. Bullion futures for December delivery advanced 1 percent to settle at $1,331.4 an ounce on Wednesday evening in New York.

Bullion looks favorable over the long-term, Barrick Gold Corp. President Kelvin Dushnisky said. Rob McEwen, chief executive officer of McEwen Mining Inc., said gold may reach S1.700 to $1,900 an ounce, near a record, by the end of the year.

A 25 basis-point increase in Fed rates would not change the outlook for the precious metal, said Nick Holland, the CEO of Johannesburg-based Gold Fields Ltd.

"Im very positive about gold in the long-run," Holland said in an interview. "I think well see fresh highs for gold in my lifetime. Ill stick my neck out on that, absolutely."

Tear of the Unknown"

Miners are not the only ones citing economic and geopolitical concerns that could sustain the gold rally. Prices may reach $1,500 in coming months as central banks delay rate hikes "in fear of the unknown", Francisco Blanch, head of commodities research at Bank of America Merrill Lynch, said in August

A potential election to the US presidency of Donald Trump could cause "a lot of nervousness on what that means not just to the US but for the global economy", pushing gold up to $1,400, David Wilson, a London-based analyst at Citigroup Inc. said in a telephone interview Tuesday.