INTERNATIONAL. U.S. Gold Corp (UXG.TO) (UXG.N) Chief Executive Rob McEwen said he expects global financial worries to push gold prices above US$2,000 an ounce this year and even higher in the next few years.
He also said major gold mining companies should increase dividends to attract investors. Shareholders currently are not getting the kind of returns they should expect with the gold price so high, he added.
"Gold (company) shares are undervalued and the gold price is going higher because of all the financial uncertainties. You will see a continued shift of investors putting more of their portfolios into gold," McEwen told Reuters on Thursday on the sidelines of the Dahlman Rose & Co Emerging Miners Conference.
"It's on its way to US$5,000 in the next three or four years," he added.
Gold futures in the United States were trading at US$1,654 on Thursday. The futures hit a record high above US$1,900 in September.
"Gold was motoring last year. Then, in the fourth quarter, it rolled over and took the stocks with it," said McEwen, who previously founded Goldcorp (G.TO), now Canada's No. 2 gold miner.
He is the largest shareholder of U.S. Gold and of Minera Andes (MAI.TO), which are slated to merge and form McEwen Mining Inc. The companies operate mines in Nevada, Mexico and Argentina.
McEwen, a well respected voice in the gold industry who was to give the keynote address to the conference on Friday, said the retreat in the gold price last year was mainly because of the European debt crisis.
"If you go back a couple of years, people were trading out of the dollar into the euro. They thought the dollar was going down the drain," said McEwen.
"Then suddenly they thought, 'Wait a minute, that strategy's not working,' and they moved back into the dollar. And gold often moves in an opposite direction to the dollar."
McEwen pointed out the anomaly that gold company shares lag the metal's price -- something often viewed as a barrier to more investment in the stocks of the major companies such as Barrick Gold (ABX.TO) and Newmont Mining (NEM.N), known as "seniors."
"The seniors have lost their luster," he said. "If someone is looking at the gold market and they happen to look at the seniors, they say, 'Well, they haven't done anything.'"
He noted data showing that since 2006, the gold price has risen 129%, while Newmont's share price has risen only 6 percent and Barrick's is up just 35%. The stock of other seniors like Kinross (K.TO) and South Africa's AngloGold (ANGJ.J) have actually fallen.
"Those are the leaders in the industry, and an investor would look at that and say, 'They've done nothing.' You're not even getting they boats going up with the tide."
The senior gold stocks, he said, have been trading well below their expected level relative to the gold price for the past 25 years. "They've been over-sold."
The solution, McEwen said, is for major gold companies to boost dividends, as Newmont did recently by linking the dividend to the gold price.
"These companies, if management wakes up, have lots of cash and these metal prices are filling their treasuries up. Rather than make some of these horrible investments they've made, start increasing the dividends.
"In this environment, where yields are so low, to have the exposure to gold, plus the higher dividend, I think you'd attract a lot more money."
In afternoon trading on the New York Stock Exchange, U.S. Gold Corp shares were up 3.5% at US$4.06. Newmont was up just 0.6% at $63.75, while Barrick was down 34 cents at US$48.43.