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Franco-Nevada CEO: Trump's policies are key to the gold price rally

The policies of U.S. president Donald Trump have devalued the dollar and fueled a gold rush, pushing prices to record highs above $4,000 per ounce in the past week, said Franco-Nevada's CEO, Franco-Nevada, on Thursday.

Paul Brink, who spoke at a Melbourne business lunch, said that the combination of tariffs and a growing structural imbalance in the U.S. Trade Balance as well as the breakdown in trust in U.S. Institutions has accelerated "de-dollarisation".

De-dollarisation is when countries stop relying on the dollar for financial transactions and as a currency reserve. Gold becomes more affordable to buyers who use other currencies when the dollar is weaker.

Brink, the CEO of the $41.3 billion company that invests into gold mines for a portion of the revenue generated, said: "You could not have written a better script on how to undermine our dollar."

The U.S. has lost its investment rating of 'AAA" due to tariffs that are reducing the U.S. share of international trade, and also eroding its currency. Its structural deficit is the worst of all the Group of Seven countries.

He said, "The third thing that you need in order to be a reserve currency is an unbreakable faith in your institutions' independence." "And Mr. Trump undermined the banks. He plays a pivotal role in this. This, I'd say, is what drives this leg of the gold cycle," said he.

Gold has risen 54% in the past year and now stands at $4,000 per troy-ounce.

He said that a longer-term rally in gold prices will come from the way central banks view monetary policy, and their own reserves.

He said that central banks are now aware of the fact that their citizens do not tolerate austerity. The way to get out of a recession is to increase liquidity. This will also boost the value of real estate and gold.

He said that if gold prices are increasing at 9% per year, then the "rational goal" would be to estimate that in five years the gold price will reach $6,000 per ounce, and within 10 years it will hit $9,000.

AUSTRALIA GROWTH

Brink stated that Franco-Nevada plans to expand in Australia, and recently hired two people in the resource-rich Western Australia. He said that Franco-Nevada would also like to find junior goldmine developers.

He told the audience that he was hiring because he wanted to concentrate more on Australia.

Australia is the largest gold producer in the world.

The product is set to

The country's second-most valuable resource export

Prices have risen to new records this year.

(source: Reuters)