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Sandstorm Gold CEO sees room for gold price to retreat but is bullish long term

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Sandstorm Gold CEO Nolan Watson.
Source: Sandstorm Gold Ltd.

While some see the recent boost to gold prices setting a new minimum price, at least one gold executive sees room for the benchmark to retreat off current levels in the near term.

Reuters reported Sept. 16 that Kinross Gold Corp. CEO Paul Rollinson said at the Denver Gold Forum that he sees a gold price of US$1,500 per ounce as a new "floor" for the commodity. However, gold drifted to just under US$1,500/oz the same day, and royalty company Sandstorm Gold Ltd. President and CEO Nolan Watson told S&P Global Market Intelligence that he sees potential for gold to retreat a bit even as he remains bullish in the longer term.

"I think the word floor for gold is a silly one because gold is so volatile," Watson said on the sidelines of the conference. "I believe that the gold price has the risk to pull back here actually a little bit."

That said, Watson is very optimistic for the long term compared to other gold executives and sees the commodity climbing to above US$2,000/oz in the next two to three years.

"I don't mean 'maybe,' 'it might,' 'it's poised to' — I just feel it in my bones it will be," said Watson, a former CFO of what is now Wheaton Precious Metals Corp.

Traditionally, investors have been bullish on gold when they are bearish on the U.S. dollar, Watson explained. However, as gold prices recently rose, people remained bullish on the U.S. dollar, a good sign for the future of gold companies amid global economic uncertainty.

Investors realize the only way out of a growing fiscal mess will be by printing more money and devaluing the U.S. dollar to rescue the economy in the next few years, Watson said.

"There's so much debt in the economy, both personally and at the corporate level and government level, that the only way out is to devalue the money to sort of monetize the debt," Watson said. "People will be bearish on the U.S. dollar, and when that happens, people will be bullish on gold, and it's going to go through the roof."

While a rise in demand is typically thought to stimulate supply, gold producers' options to boost supply may be limited. Watson said there are few new gold discoveries around the world, and miners are increasingly having to drill more deeply and at a higher cost to get to new gold supplies.

"Unlike the oil and gas industry, where there's been a total game-changing technology for drilling, our core-drilling technology hasn't really changed that much," Watson said. "So it's not getting that much cheaper, it's not getting much better."

Watson added that he is proud that Sandstorm is "the only streaming and royalty company right now that is both growing its portfolio and massively buying back their shares on the market every single day." That should be a "pretty good recipe" for the company going forward as gold prices are poised to rise beyond current six-year highs.