Yellen call key for gold fortunes

Les Davis and Bill Beament are two of the Western Australian gold industry’s most influential people, but the person who has infinitely more power over gold in WA than the chief executives of Silver Lake and Northern Star doesn’t live here.

Janet Yellen, chairman of the US central bank, is the world’s Mrs Goldfinger, because what she decides to do with US interest rates will determine what happens to the gold price.

Wars and economic uncertainty such as that experienced since the 2008 GFC are factors influencing the price of gold, and the success (or otherwise) of the WA gold mining industry.

But it is the value of the US dollar, gold’s archrival at the super-safe end of the investment spectrum, which has the biggest influence.

At some point in the next 12 months it is likely Ms Yellen will decide that it’s time to raise interest rates from the near-zero setting of the past six years.

When that happens, in theory, the US dollar will rise because higher rates will be taken as a sign that normal economic conditions are returning – and the need to lock cash away in gold, and other zero interest rates safe havens, is fading.

For WA gold the move up in US rates could be a double-edged sword, because while it might knock the gold price down, it could also knock the Australian dollar down.

If that happens then the WA gold mining industry could emerge unscathed from rising US interest rates – but it would take courage to place a bet on that happening.