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UPDATE 2-Goldcorp CEO sees minor retreat in gold price
August 19, 2011 / 6:42 PM / in 6 years

UPDATE 2-Goldcorp CEO sees minor retreat in gold price

* Jeannes says retreat will set stage for more growth

* Gold price should continue to rise over next 2 years

* Gold seen topping inflation-adjusted record high

* Equities will soon catch up with bullion’s surge (Adds details from interview; In U.S. dollars, unless noted)

By Euan Rocha

TORONTO, Aug 19 (Reuters) - Even if gold prices backtrack a little before the end of this year, the long-term outlook of the precious metal remains strong, the head of one of Canada’s largest gold miners said on Friday.

Spot bullion prices have risen more than 25 percent since the end of June and more than 32 percent so far this year, as the specter of sovereign debt defaults and cracks in an already fragile world economy have driven investors to load up on the safe haven metal.

Spot gold XAU= touched a record high of C$1,877 an ounce on Friday after weak U.S. economic data spooked investors and led to a renewed flight to safety.

That suggests that the precious metal in ripe for a brief retreat, the chief executive of Goldcorp said on Friday.

“Whenever we start to see these very large, near parabolic moves in the price it does make me nervous. I would prefer to see a more steady measured growth in the price like we’ve seen over most of the last 10 years,” Goldcorp (G.TO) CEO Chuck Jeannes said.

“What it means is there will be a correction at some point -- that is natural and that is actually healthy for a market.”

He said a retreat is likely to come this year but it should prove relatively minor and short-lived. The market is now entering what usually is the strongest part of the calendar year for gold demand and prices.

Despite the likely pullback, the stage is set for gold to breach its inflation-adjusted record high of $2,400 an ounce in the near future, Jeannes said.

“We seem to be getting there faster than I thought,” he said in an interview with Reuters. “I used to think of that number in a three to five-year time horizon, but now I could certainly see it happening in the next year or two.”


Despite the surge in the price of gold, shares of the world’s largest gold miners have lagged. The ARCA Gold Bugs Index .HUI, whose components include some of the world’s top gold miners, is up just 2.6 percent year-to-date.

Operational issues, higher costs and production shortfalls are partly to blame for the underperformance.

In addition, many analysts say the rise of gold ETFs - exchange-traded funds that invest directly in the precious metal - have given investors an attractive alternative that still offers direct exposure to the price of gold.

But Jeannes is not worried about the rising allure of gold ETFs. It makes perfect sense that gold equities lag spot bullion prices when they are surging, he said.

“Something that people don’t appreciate is that the spot gold price today is simply what you can sell an ounce of gold for today,” said Jeannes. “We are operating mines that last for 10, 12, 15, 20 years, and so the market has to value us based on a long-term view of the gold price.”


Jeannes, who has worked in the gold industry for over 15 years, believes gold equities will eventually begin to catch-up with the move in bullion, as the long-term price outlook becomes clearer.

“I don’t think that’s happened yet. This move has been so rapid, the market hasn’t got its head around what the long-term implications are and as that happens, you’ll see gold equities move.”

Jeannes says gold equities have certain characteristics that make them more attractive than either physical gold, or ETFs over the long run.

“Perhaps most importantly, we can grow,” said Jeannes. “You can see Goldcorp growing 60 percent over the next few years. An ETF or a gold bar in your vault can’t grow, so if we look at the relative investments over the long term, a well-run gold company should outperform physical metal over the long term.” ($1= $0.99 Canadian) (Reporting by Euan Rocha; editing by Frank McGurty)

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