Gold Digger: ANZ puts US$2080/oz price target on gold, and can silver keep outperforming?
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Our Gold Digger column wraps all the news driving ASX stocks with exposure to precious metals.
The trigger for gold’s big move higher remains a pause in US interest rate hikes – something that could happen in the second half of the year, ANZ commodity strategists Daniel Hynes and Soni Kumari say in a research note.
“The impact of the Fed’s aggressive tightening over the past year is beginning to show,” they say.
“The Fed’s hiking trajectory has been guided by US CPI inflation and labour data, which are showing signs of easing.”
Despite this, Fed officials remain divided on the timing of a pause in rate hikes, Hynes and Kumari say.
“Currently, the market is pricing a 25bp hike in the next FOMC meeting. We expect rate hikes of 25bp in May and June 2023,” they say.
“If the Fed pauses earlier than the market expects, it could quickly amplify gains in gold.
“We see gold reaching USD2,080/oz in next the 12 months.”
Silver, as an inexpensive alternative, outperformed gold in a recent price rally, with the gold:silver ratio retracing from 91x to 78x since early March.
The gold:silver ratio shows how many ounces of silver it would take to buy once ounce of gold.
But silver is also an industrial metal, and this could dampen the price in a recessionary environment.
“Silver’s performance is … linked to global economic growth due to its industrial application,” Hynes and Kumari say.
“While silver’s fundamentals are supportive, a downturn in economic growth could weigh on industrial demand, taking the gold:silver ratio towards 85x–90x.
“We expect the silver price to average USD24/oz this year.”
Gold has broken below the US$2000/oz level, currently paying US$1980/oz. Silver is also lower at US$24.76/oz.
Pretty well. There were more winners than losers in the mid to large cap cohort, led by a recovering St Barbara (ASX:SBM) at 5%, with De Grey Mining (ASX:DEG) and Gold Road Resources (ASX:GOR) putting on 4% apiece.
Standout African miner Perseus Mining (ASX:PRU) continued a run of good form in the March quarter, producing 130,275oz at AISC of US$971/oz.
That’s a huge cash margin of US$850/oz (Dec quarter: US$765/oz), thanks to an improved gold price and lower AISC.
Fellow standout Capricorn Metals (ASX:CMM) released a PFS on the 1.45Moz Mt Gibson project in WA’s Mid West, which could make CMM one of Australia’s 10 biggest listed gold miners when it comes online.
According to CMM, the development of Mt Gibson would make it a 270,000ozpa miner.
The project is expected to deliver 152,000ozpa over its first 7.5 years at attractive AISC of $1420/oz.
That is on a reserve shell priced at just $1900 per ounce of gold, around $1000/oz shy of current levels.
Here’s how ASX-listed precious metals stocks are performing:
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