Gold, traditionally the world’s stable, safe-haven asset for investment, may find itself challenged by the likes of marijuana. As more and more countries around the world toy with the option of legalising the use of recreational cannabis – Canada already did it in late 2018 – investors looking for the next big thing could very well opt for that. According to John Reade, chief market strategies for the World Gold Council, there is no denying that marijuana and cryptocurrencies have had an impact on gold. “What we have seen
over years of investing in resource companies is that there are certain investment communities that are driven by the search for the next ‘big thing’,” he said. “And exploration companies have been able to deliver this to them from time to time. In my view that is what is tempting investment companies to dabble in the likes of cryptocurrency and marijuana.” But, he said, the difference was that a single discovery of gold could make a massive return. Gold prices, however, have been on a steady decline since their peak in 2011, and dipped following the US Federal Reserve announcement of a hike in
the benchmark interest rate. “The relative performance of gold equities from 2004 to 2008 has been dire, with the worst being from 2011 to 2015,” said Randy Smallwood, president and CEO of Wheaton Precious Metals. Describing the gold industry as out of control in some respects – especially in terms of cost – many decisions did not make sense. “Having been driven by the super cycle where no one could do wrong, the turn was brutal,” he said. So much so that many investors still think of gold equities as a poor investment. Marijuana and cryptocurrencies, on the other hand, have been
growing in popularity – and with demand rocketing, investors are opting to rather take a chance on the proverbial new kids on the block. In Canada, for example, roughly 773 tonnes of cannabis was consumed in 2017, a number that's sure to increase following the legalisation due to ease of access. Both Reade and Smallwood, however, are quick to point out that gold is fast making a
comeback and warn against writing off the commodity. “The sector has been beaten up and under pressure for many years and we have seen that in the commodity price itself, but there has been a definite change since last year.” According to Reade Australia is about to hit an all-time high in its gold production. Both agreed that while gold might have hit a low, it remained good and probably impossible to keep down.
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Rail capacity to Port Elizabeth is currently only 5.5 million tonnes per annum but could be upgraded to 12 million tonnes. – Henk Langenhoven
