Despite a late-week cool-off, gold remains in striking distance of its all-time highs
The Australian Federal government sees a good longer-term future for gold producers
This week’s top ASX golden gainers include: Dart Mining, Alto Metals, Felix Gold
The gold price, as you probably very well know has/had been soaring this week, hitting all-time highs yet again, trading north of US$2,302 per ounce and in the Aussie version, a stonking $3,511 a couple of days ago.
These have since taken a bit of a breather, pulling back a wee tad to close the Aussie week – perhaps due to profit-taking sell pressure, but also partly due to some rate-cut-optimism-killing vibes from certain Fed members on Thursday evening.
But all up, so far it continues to be a beaut year for the precious yellow one, with a YTD gain of about 11.2%.
Source: abcbullion.com.au
That’s all well and good for the commodity price, but what about the gold mining and exploration stocks disconnect? Is that still prevalent?
Actually, there have been some further signs this week that the gap may be closing. The performance of the S&P/ASX All Ordinaries Gold Index (ASX:XGD), which covers gold-industry players on the local Aussie bourse, would suggest it indeed is.
That’s up about 4% for the week, and a very decent 14% over the past month, despite a bit of a dip late today (Friday).
Gold prices have officially crossed above $2,300 for the first time in history.
Since February 14th, gold is up an incredible $300/oz or 15% in less than 2 months.
Even as 3 interest rate cuts have been removed from market forecasts, gold is pushing higher.
— The Kobeissi Letter (@KobeissiLetter) April 4, 2024
What’s been driving the golden gains train of late?
Various factors, including the US Federal Reserve indicating that a couple of rate cuts are still shuffled somewhere in their deck of cards, and indeed the hand they might well play at some point this year.
Optimism for that eventuality was delivered by US Fed chairman Jerome Powell at Stanford University midweek and that gave the US dollar and US Treasury bond yields a swift uppercut, helping gold and equities.
But then…
… this whole rate-cut narrative is turning into something of a soap opera, or at least one big tease, because late on Thursday evening, Aussie times, comments from Fed officials suggested rate cuts may come not in the middle, but instead late in the year or even next year.
Wall Street took a dip fell after Minneapolis Fed boss Neel Kashkari said that although the Fed has pencilled in two rate cuts, it has the rubber handy because none may actually be implemented this year if inflation stays sticky.
“If we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all,” Kashkari said. “There’s a lot of momentum in the economy right now.”
The US macroeconomic narrative has another opportunity spoil the party a tad for gold in the next day or so, too, with more Fedspeak and US employment data on the cards (the US non-farm payrolls report hits late, late Friday Aussie time).
The NFP – that’s the next point of focus for markets, and if it comes in hot again, like it did in February and like plenty of analysts seem to think it might, then gold and equities may see some short-term cooling off.
Yet this…
… could be just another short-term blip for gold if it plays out that way.
Add a pinch or two of ongoing Middle Eastern and Eastern European turmoil into the pot, and a great big spoonful of central bank buying and stir.
“There is big demand [for gold] coming from Asia, particularly from China and solid demand from central banks,” noted Carlo Alberto De Casa, a market analyst at Kinesis Money this week, also citing the rate-cutting hopes and geopolitical risks that could keep save haven gold on the up.
As for the last factor, ongoing it very much is. The Associated Press reported that US jarhead types are expecting some sort of retaliation from Iran after an Israeli air strike earlier this week managed to knock some top Iranian military brass off the board.
How ’bout an Aussie gov gold projection?
For what it’s worth, the Federal government, via the latest commodities projections report by the Department of Industry, Sciences and Resources, wrote this very recently:
“Australian gold export earnings are forecast to increase by 14% to $28 billion in 2023–24.”
So that’s pretty positive for gold producers. But hang on, it looks further ahead and it’s not so upbeat:
“Export earnings are forecast to decline in real terms over the outlook period to around $20 billion by 2028–29. This is largely because of expected declines in real gold prices.”
Ah… bummer. What goes up, must come down and all that. Just buy Bitcoin? The gov continues with:
“Prices are forecast to remain elevated throughout 2024 and 2025, before softening in real terms to average around US$1,750 an ounce by 2029.”
But wait… it added something positive again:
“[Australian gold] production is forecast to grow over the long-term as major new projects and expansions come on-stream… Higher export volumes are predicted to outweigh the impact of lower [longer term] Australian gold prices in real terms.”
What else is making news?
• Bank of America remains bullish on gold for 2024. In a note published earlier this week, its commodity analysts reaffirmed their outlook for gold prices to move north of US$2,400 an ounce this year.
“We had previously proposed a $2,400/oz price estimate if the Fed cut rates in 1Q24; we commit to that estimate for this year, even if rate cuts come later,” said analyst Michael Widmer in the report.
• Central banks continued to buy gold in February, according to The World Gold Council’s latest data, with global central bank gold reserves increasing by 19 tonnes in the month.
That said, purchases were reportedly down 58% compared to January as some central banks also took the opportunity to take some profit.
• HSBC has launched a tokenised gold product – a blockchain-based offering for its retail customers in Hong Kong.
The HSBC Gold Token launched for trading in the Hong Kong market last week, according to a report from the South China Morning Post, and it’s the the first such product to be issued by a bank.
• Oh, and this…
So far in 2024 here are the results:#Silver up 13.13%#Gold up 11.88%#Bitcoin up 52%
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