TORONTO (miningweekly.com) – Growing investment demand for gold, combined with declining mine production levels in the longer term, will continue to support strong prices for the “foreseeable future”, Barrick Gold CEO Aaron Regent asserted on Wednesday.

Although demand for the metal has strengthened significantly, the gold market remains small, and is “dwarfed” by other asset classes, he said at the company's shareholder meeting in Toronto.

As a result, a small transfer of investment dollars to the gold market could have a “substantial” effect on valuations.

“We believe we have barely scratched the surface of further potential investment demand,” Regent said.

“Gold has reasserted itself as an attractive financial asset, as a store of value, a safe-haven investment as an alternative to currencies, stocks and bonds.”

On the one hand, central banks, which have historically been net gold sellers, appear to be rethinking their portfolio strategies, and are diversifying their holdings into gold, Regent said.

Net official sales of gold are sharply lower, and net buying in the last few quarters “would seem to indicate a change in sentiment is clearly under way”, he said.

Secondly, investment demand for the metal has grown significantly, as investors seek gold's security as a hedge against future inflation or currency debasement.

Worries about unprecedented levels of government debt outstanding, ongoing global imbalances and the concerns countries have over excess US dollar reserves, combined with risk aversion over escalating sovereign credit worries in Europe, “position gold to benefit, as investors and central banks look for alternatives to the major currencies of the world”, Regent said.

Gold futures rose to their highest levels this year on in New York on Wednesday, with gold futures for June delivery touching $1 175,30/oz on the Comex in New York.

'LET'S JUST PRAY'

Barrick's venerable chairperson and founder Peter Munk agreed with Regent's assessment.

“A lack of confidence in governments that issue paper currency is declining by the hour and by the day,” he commented.

This declining confidence will send investors heading for gold, to preserve their wealth, he said.

But Munk warned against projections that the gold price will rise sharply to much higher levels.

“Let's just pray, I don't care how many shares in Barrick you have, let's just pray that it's not going to go out of control....that gold will not jump up to two, or three or four thousand dollars.

“You don't want to be living in a country, you don't want to be living in a social structure, where the overall lack of confidence in the government would have reached that kind of level,” Munk insisted.

He said that the best way forward for gold would be a continuation of the metal's gains over the last ten years.

“I think the last decade's trend, a gradual, normal increase, totally in proportion with the increased demand,” Munk told reporters after the meeting.

“That to me, is the healthy, normal development of a commodity price.

“But a sudden jump like these gold bugs talk about, to me, would be a very bad thing.”