It's been a tough year for gold and gold producers. Since reaching an annual high in May 2021, the gold price steadily declined and is now trading consistently at about $1,800 per ounce. As a result, gold equities have also been under a lot of pressure.

To gain insight into gold the market, we spoke to Kevin MacLean, the Chief Investment Officer at Star Royalties.

Who is Star Royalties and Kevin MacLean?

During his career, MacLean has received 13 Lipper awards for the best risk-adjusted returns in the gold mining sector and has received seven Brendan Wood International Top Gun awards as a leading mind in the gold mining sector.

He has over 30 years of industry experience and specialises in precious metals and mining investments. He is a Professional Engineer, holding a Bachelor of Applied Science degree from the University of Toronto, and is a CFA charter holder.

Star Royalties is a precious metal green royalty and streaming investment company. Its objective is to create wealth for clients through accretive transaction structuring and asset life extension.

The Star Royalties team has worked together for over 20 years and has built strong industry relationships. These relationships result in an extensive global asset knowledge base and a pipeline of opportunities.

Where is Gold Headed in 2022?

A few months after the COVID-19 pandemic broke, gold reached an all-time high of $2,074 per ounce in August. The price then declined to reach $1,710 per ounce in February 2021 before returning to $1,898 in May 2021. It's since declined to $1,727 on two occasions and is now hovering near $1,800.

Considering the less-than-stellar performance over the past few months, where's it going next? MacLean believes that gold will surge yet again. As he puts it,

"There's a super gold market coming... It's an asset class in a space you don't want to not be in."

Monetary Policy

MacLean predicted in 2004 that the Federal Reserve could never implement tight monetary policies again. Apart from two quarters in 2007, he was right. He also predicted in 2015 that US debt would reach $26 trillion by 2025.

However, the COVID-19 pandemic and the subsequent quantitative easing has worsened its position significantly. As a result, the US now has a debt of $29 trillion, and he believes it could exceed $30 trillion. The situation is now six to seven years ahead of what the Congressional Budget Office predicted in 2015.

Such debt means that a small rate rise would see the US using a third of its budget to pay the interest on its debt at current interest rates.

There is some space to move, with 25% of the US's federal debt held by the Federal Reserve and 20% by entitlement programs. The result is that 45% of the US government's debt is effectively interest-free. Based on this, MacLean believes that the US government has a couple more years before technical insolvency.

His concern is that the government is not taking steps to reduce its debt, believing the Federal Reserve should begin to taper interest rates upward, slowly. Such careful increase would allow it to control the rising debt and prevent an economic catastrophe. MacLean counsels caution, however, following 2018's unsuccessful attempts to reverse quantitative easing.


As a result of the Federal Reserve's monetary policies, MacLean believes that modern monetary theory (MMT) is here to stay. As a result, inflation is certain to increase over time.

MMT is a macroeconomic framework. It states that monetarily sovereign countries don't need to rely on taxes or borrowing for government spending because they can print as much of it as they like as the sole issuers of their currencies. It also posits that rising national debt should not constrain spending as they cannot become insolvent.

Yet, problems occur when the real economic output does not keep pace with the increased money supply. As the money supply increases, so too does the demand for goods and services, which causes prices of these goods and services to go up, resulting in inflation.

MacLean notes that the compound inflation rate over the past 40 years has been about 5.9%. The money supply was tighter, and governments conservatively managed balance sheets in those times.

Tighter money supply and conservative balance sheets are a thing of the past. Therefore, MacLean believes real inflation is not at the levels the Federal Reserve calculates but higher. He states,

"gold... is an asset class that reprices itself in a debasing currency, based on real inflation, not on government statistics."

Rising inflation devalues currency, and gold has a negative correlation to the dollar's value.  As investors use gold to hedge against inflation, increased inflation leads to rising gold prices.

The Rise of Cryptocurrencies and Digital Money

With cryptocurrencies and digital money increasing in popularity, should gold investors be concerned? MacLean believes that digital currencies are replacing gold as an investment vehicle for young investors. However, he believes the adoption and popularity of digital currencies is a precursor to governments worldwide digitising the financial system.

Financial system digitisation would give governments more control over their taxation systems. By eliminating unreported tax income, it will make taxes easier to collect. It would also suppress criminal activity, with the potential to reduce marginal tax rates.

Should this happen, governments will still control economies through their monetary policies. MacLean believes this means gold will remain popular as a hedge against economic downturn and as an investment.

The Bottom Line

Gold has underperformed in the past year. Yet, MacLean considers modern monetary policy provides structural economic optimism for gold prices, and he sees a strong future for gold.

As he puts it,

"Everything's going up, but gold is moving up faster."
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