Does the gold bull run still have legs?

Key Concepts

• Gold as a Safe Haven: The increasing demand for gold driven by geopolitical instability and concerns about the US dollar’s reliability.
• Stagflation: A combination of high inflation and slow economic growth, mirroring conditions of the 1970s.
• Central Bank Gold Purchases: Significant buying of gold by central banks globally, reducing available supply for other investors.
• Mining M&A Activity: Anticipated increase in mergers and acquisitions within the gold mining sector due to strong cash flows.
• De-dollarization: The trend of countries reducing their reliance on the US dollar, often through gold purchases.
• Canadian Mining Industry Concerns: The potential loss of Canadian mining champions through foreign acquisitions and subsequent relocation of headquarters.
• Value vs. Price in Acquisitions: The importance of assessing the long-term value of an acquisition rather than solely focusing on the initial price.

Gold’s Rally and the Future of Mining: An Analysis with Pierre Le Saint Pierre

I. The Current Gold Market & Historical Parallels

The interview centers on the recent surge in gold prices and its potential trajectory. Pierre Le Saint Pierre draws parallels between the current market conditions and the late 1970s, when gold prices rose from $90 to $800 in just three and a half years. This previous surge occurred amidst high inflation and stagflation – a situation he believes is re-emerging. He attributes the current inflationary pressures to “Mr. Trump’s cornucopia of regressive tariffs, profligate spending and eye watering fiscal deficit,” characterizing it as a “toxic cocktail for more stagflation.” This, coupled with growing doubts about the US dollar’s status as a safe haven, is driving demand for gold. He anticipates continued growth, predicting 2026 will be another record year for gold prices.

II. De-dollarization and Central Bank Demand

A key argument presented is the increasing trend of de-dollarization, particularly by countries like China and Turkey. Le Saint Pierre notes that China has significantly reduced its holdings of US dollars, opting instead to invest in gold. He states that “half of the world’s production [of gold] is going into central banks,” leaving only approximately 1800 tonnes available for other investors. He posits that a $1 trillion influx of savings into gold could drive the price to “17,000 plus.” This highlights the significant impact of central bank demand on the gold market.

III. Mining Sector M&A and Acquisition Risks

The discussion shifts to the gold mining sector, anticipating a surge in mergers and acquisitions (M&A) in 2026. Producers are experiencing “incredible amount of cash flow” and, despite shareholder distributions, retain substantial capital for growth. Le Saint Pierre predicts “a lot of new M&A in the coming year.” However, he cautions against repeating past mistakes, referencing Kinross Gold’s “overpriced acquisition in Africa” as an example of deals that took years to become profitable.

Despite the risk of overpaying, he believes current valuations provide room for acquisitions, noting that stocks are trading at a consensus gold price of $3200 versus a current reality of $4200 per ounce. This “margin” allows for premium acquisitions.

IV. The Teck-Anglo American Deal and the Future of Canadian Mining

The interview addresses the recent acquisition of Teck Resources by Anglo American, expressing concern about the “hollowing out of Canada’s mining industry.” While acknowledging the deal was the “best that the tech shareholders could get at the time,” Le Saint Pierre is skeptical about the long-term commitment of Anglo American to Canada. He cites a pattern of previous acquisitions (Inco, Alcan, Falconbridge, Noranda) where promised headquarters remained in Canada for only a limited time. He states, “Five years from now, go to Vancouver and tell me whether or not the headquarters are still there.”

V. Assessment of Mark Bristow’s Tenure at Barrick Gold

Le Saint Pierre offers a critical assessment of Mark Bristow’s leadership at Barrick Gold, attributing his departure to several factors. He highlights Bristow’s “incapacity to look for accretive acquisitions,” stating that he “left on the table several acquisitions that would have been great for Barrick.” He emphasizes the importance of “price is what you pay, but value is what you get,” suggesting Bristow prioritized price over potential value. Furthermore, he points to Barrick’s failure to meet its guidelines over five years and the subsequent doubling of the stock price after Bristow’s departure, indicating a “Bristow discount of 50%.” Bristow’s “stubborn[ness] in the sense that he refused to do a premium takeover” is also noted as a contributing factor.

VI. Technical Terms & Concepts

• Stagflation: A situation characterized by slow economic growth and high inflation.
• Accretive Acquisition: An acquisition that increases a company’s earnings per share.
• M&A (Mergers and Acquisitions): The consolidation of companies or assets through various types of financial transactions.
• ETF (Exchange Traded Fund): An investment fund traded on stock exchanges, often tracking a specific index or commodity.
• De-dollarization: The reduction of a country’s reliance on the US dollar.

Conclusion

The interview paints a bullish picture for gold, driven by macroeconomic factors like inflation, geopolitical instability, and a shift away from the US dollar. While the mining sector is poised for increased M&A activity, caution is advised against overpaying for assets. The discussion also raises concerns about the future of the Canadian mining industry and the importance of strategic leadership in maximizing shareholder value. Le Saint Pierre’s analysis emphasizes the need for disciplined investment and a focus on long-term value creation in a rapidly evolving global landscape.