How to own gold without having to lug it around and stash it somewhere safe – like a safe.
That’s something the World Gold Council is working on, says council chairman Randy Smallwood, whose company pioneered precious metals streaming, which is also a way of owning gold without having to actually dig it out of the ground yourself and lug it around.
Smallwood, the CEO of Wheaton Precious Metals (TSX,NYSE:WPM), spoke today at the BMO Capital Markets Global Metals, Mining and Critical Minerals Conference in Florida, where he said he believes gold is headed for an uptick.
And his own company is poised for significant growth in the next few years.
“We’re going to see over 40 per cent growth in the next four years in production,” Smallwood told BIV News. “We see a little bit of that growth this year, but really 2024 and 2025 are going to be dramatic steps up in terms of production.”
In 2022, Wheaton Precious Metals sold 293,234 ounces of gold, 21,570 ounces of silver, and 15,076 ounces of palladium.
The company owns no mines itself, but finances them and takes future production of gold, silver and palladium instead of equity.
Since it was founded in 2004, Wheaton Precious Metals has invested more than $10 billion in mines around the world.
The gold, silver and palladium the company owns and sells comes mostly from copper, nickel and lead-zinc mines, for which precious metals are byproducts.
“Over half of our production comes from copper mines,” Smallwood said. “Another 20-plus per cent comes from lead-zinc mines and nickel mines. We support the critical minerals industry by purchasing their non-core precious metals byproducts.”
Gold prices have held in the US$1,800 per ounce range throughout 2022. Smallwood thinks gold prices would have been a lot higher in 2022 were it not for the strength of the U.S. dollar.
“The thing that’s held gold prices back is the strength of the U.S. dollar," Smallwood said. "I would call 2022 the year of the U.S. dollar, and I think 2023 is ultimately the year of gold.”
Central banks have been loading up on gold – buying a record amount in the latter half of 2022, according to the World Gold Council. Gold is seen as a hedge against inflation, and a safe haven during times of uncertainty.
Smallwood believes it’s also because the American dollar has become “politicized.”
“Society has always needed gold because it needs a non-political measure of value,” Smallwood said. “One of the things that happened last year that, I think, has helped support gold was the fact that the U.S. dollar became political."
One of the West’s responses to Russia’s invasion of Ukraine was the use of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to essentially freeze Russia out of the global financial transaction system. The U.S., Canada, EU and UK agreed to remove several Russian banks from SWIFT last year.
“The fact that Russia had U.S. dollar reserves that were limited because of their access to SWIFT, which was restricted, meant all of a sudden that the U.S. dollar was a political tool,” Smallwood said. “And what that’s driven is a lot of central banks around the world are heavily investing into gold.
“They’re taking the U.S. dollar and they’re looking at it and they’re going ‘for my central bank reserves, I really do want something that isn’t subject to political impact.’ So what we’re seeing is record central bank buying of gold around the world.
“I really believe that having a non-political store of value, which is what gold really delivers, is incredibly important.”
To make it easier for investors to own gold without having to physically hold it in the form of gold bars or coins, the World Gold Council is working with bullion trading banks, central banks, gold refiners and gold miners to develop a new digital gold asset called Gold 247.
“What it comes down to is trying to dramatically improve the accessibility, the fungibility and the provenance capabilities of gold,” Smallwood said. “Really it’s wrapped around digitalizing the trade in gold, coming up with a way to actually have confidence in ownership of gold but without having to actually move the gold around.
“The technology is all there. It’s just a matter of just getting implementation, and once that happens we think gold will become much more accessible.
"Within a year we hope to have a strong digitalized version of gold available for people to own with full confidence of knowing that there is real gold backing in one of those tokens. In a sense, what we are creating is a much more accessible ETF.”