Gold Digger: Aussies hoard gold bars, coins at record rate
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Our Gold Digger column wraps all the news driving ASX stocks with exposure to precious metals.
Consumer demand for gold in Australia increased from 7.2 tonnes in Q1 2021 to 8.9t in Q1 2022, a year-on-year (YoY) increase of 24%, the World Gold Council says.
This overall demand was driven by a 19% YoY increase in bar and coin demand, as well as an estimated 40% increase y-o-y in jewellery demand.
While positive consumer sentiment is a key driver of retail demand for gold (like jewellery), investors often use physical gold bars as a diversifier and a hedge, World Gold Council APAC CEO Andrew Naylor says.
“[This] is increasingly important in an economy where many have strong exposures to property and pro-cyclical assets,” he says.
Net buying by central banks more than doubled from the previous quarter, adding over 84t to official gold reserves during Q1 2022, dominated by countries such as Egypt and Turkey.
While 29% lower than Q1 2021, central banks continue to value gold’s performance during times of uncertainty, WGC senior analyst Louise Street says.
“The first quarter of 2022 has been a turbulent one, marked by geopolitical crises, supply chain difficulties and surging inflation,” she says.
“These global events and market conditions have solidified gold’s status as a safehaven holding, not just for investors but also for retail consumers thanks to its unique position as a dual-natured asset class.
“Given the current market dynamics, investment demand is expected to remain strong as the combination of high inflation and heightened geopolitical tensions will likely fuel demand for gold amongst investors.”
“The rot finally stopped in gold overnight, which tested support at $US1880.00 an ounce, as well as its 100-day moving average, before rallying to close 0.45% higher at $US1904.25 an ounce,” OANDA senior analyst Jeffrey Halley said Friday arvo.
Significantly, it achieved that even as the US Dollar continued to rally in New York markets.
When the value of the US dollar increases against other global currencies, the price of gold often falls in USD terms.
In Asia, pre-weekend hedging and a weaker US Dollar lifted it another 0.53% higher to $1904.60 an ounce.
“There is a definite sense that gold is benefitting from haven flows in the past 12 hours,” Halley says.
“That makes complete sense given the month-end and weekend risks in the world, as well as regional investors looking to hedge risk over the barrage of holidays next week.
“However, it is too soon to say that gold has completed its medium-term corrective sell-off as nothing breaks bullish traders’ hearts like gold.”
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It was a short but busy week for quarterlies. Here is a pick of some of the big boys.
Australia’s biggest gold miner produced 480,000oz of gold and 31,000t of copper in the three months to March 31 at all in sustaining costs of US$1008/oz.
That’s an AISC margin of US$809/oz.
It expects production to keep rising in the June quarter after narrowing FY22 guidance to 1.925-2.025Moz of gold and 125,000-130,000t copper, up on previous estimates thanks to the acquisition of Pretium Resources and its Brucejack mine in Canada.
The WA gold miner sensationally dumped guidance this week, prompting a major sell off.
Silver Lake produced 53,811oz of gold and 262t of copper in Q1 at an AISC of $1634/oz.
Despite reporting year to date production of 182,778oz of gold and 756t of copper at $1643/oz and average sales of $2441/oz, SLR said COVID cases at WA mines ‘Mount Monger’ and ‘Deflector’ in March and April led it to withdraw guidance.
The company said while it is positioned to meet its FY22 guidance, the “severe disruption caused by COVID-19 related labour shortages” and related supply chain disruptions are likely to continue.
A problem also felt by SBM, which reported a massive climb in all in sustaining costs from $1587/oz in the December quarter to $2290/oz in the March quarter on production of 61,819oz of gold.
The owner of the Gwalia gold mine in Leonora said its WA operations were impacted by skilled labour shortages as well as lower grades and third-party ore feed. It also suffered a major COVID outbreak at the Simberi mine in PNG as well as lower grades at the Atlantic gold operations in Canada.
Managing director Craig Jetson said competition for labour was so fierce in WA at the moment that critical maintenance staff were being poached in the days and weeks before shutdowns.
RRL reported gold production of 103,100oz at AISC of $1574/oz in the March quarter.
That included 74,800oz at its flagship Duketon project at $1672/oz and 28,300oz at $1216/oz from Regis’ 30% share in AngloGold Ashanti’s Tropicana mine.
RBC’s Alex Barkley said COVID and labour issues sent gold production 8% short on its estimates but AISC impacts were “controlled”.
Australia’s second biggest gold miner upped its cost guidance for 2021-22 after a March quarter where input costs and labour pressures continued to be felt.
Northern Star’s AISC has risen from $1593/oz in the September quarter to $1631/oz in December and $1656/oz in March on gold sales of 380,075oz and all in costs of $2171/oz.
Much of that had been driven by issues at the Pogo mine, where NST is expecting an improved run rate of 240,000ozpa for the second half after completing a mill upgrade and improving underground development rates.
Its average realised price of $2468/oz delivered sales revenue of $937m, with cash and bullion of $533m and net cash of $433m on hand at the end of the quarter.
Ramelius meanwhile says it plans to hit the lower end of its guidance of 260,000-265,000oz at $1475-1525/oz after producing 58,602oz at $1596/oz in the March quarter as road train driver shortages hit their peak in January and February.
It is planning a big ramp up to 69,000-74,000oz at $1525/oz in the June quarter.