Although gold prices keep climbing, it is extremely difficult for the gold mining industry to increase supply, Mark Cutifani, CEO of AngloGold Ashanti, told CNBC’s “Power Lunch” on Tuesday.
“I think we’ll hit $5,000, it’s just a matter of when,” he said about the outlook for gold prices. “In the shorter term, $2,000 is very likely given political uncertainty and what’s happening across the U.S. and Europe.” (Read More: Gold Will Top $2,000 in Next Year: Barrick CEO.)
But while the price of gold keeps rising, the supply situation has been “tough” as it’s difficult to get access to areas that have gold, Cutifani said. “Production is tough to improve upon,” the head of the South African miner said, noting that industry production has been flat for seven or eight years.
It’s also getting more costly to pull gold out of the ground. “There’s cost creep across the industry,” Cutifani said. But the same factors that are driving cost inflation are driving the price of gold higher, he noted. (Read More: The World's Biggest Gold Reserves.)
The industry also still has a good deal of work ahead of it to improve costs. “As an industry, we’ve done poorly quite frankly in terms of managing our prices,” he said. “We’re well behind industry leading sectors like the manufacturing sector and I think that’s where the big opportunity is.”
AngloGold Ashanti has done better than the rest of the industry in improving returns. “We’ve been successful in exploration we’ve restructured our businesses, we’ve taken a more a manufacturing approach to the way we run our operation,” he said. “We’ve improved cash flow by a $1 billion through those improvements.”