Gold Digger: One more bottom before gold bounces through US$2000/oz, expert says
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Our Gold Digger column wraps all the news driving ASX stocks with exposure to precious metals.
A month ago, it seemed like interest rate increases were coming to an end. Gold prices were soaring, and bulls were rejoicing.
The precious metal generally exhibits a strong inverse relationship to real rates, which rise and fall in tandem with the Fed’s benchmark rate.
But gold prices have now tumbled lower over the last five trading sessions, sliding as much as 5% after a bumper employment report signalled that further hikes to the Fed Funds rate could be at hand.
A proper curveball for those skimming the headlines.
“The US labour market added a whopping 517,000 roles in January, the most since July of 2022 and easily topping consensus estimates of a 185,000-job print,” says Daniel Moss, Market Analyst at Vantage Markets.
“Indeed, the most recent print far surpasses the average monthly gain of 401,000 seen throughout 2022.
“This wave of hiring has resulted in the unemployment rate declining to 3.4%, the lowest level in over 50 years and far lower than market expectations of a 3.6% print.”
US Fed chair Jerome Powell says further rate increases may be necessary in response to a labour market that is “extraordinarily strong”.
His colleagues have also signalled the Fed Funds rate will peak at 5.4% — that’s three more 25-basis point hikes over the coming months.
Bad news for gold bulls in the near term.
“The risks of more than a couple quarter-point rate rises are growing and if the market starts to price that, gold could be under pressure a little while longer,” says Edward Moya, Senior Market Analyst at OANDA.
“Eventually slower growth and mounting earnings risk will trigger safe-haven flows back into gold, but we are not yet at that moment. “
#Gold (XAUUSD$1,871) is likely going to decline further to re-test a 5-year major rising trendline with support around $1,825. Slight violation is permissible. Once gold bottoms, next advance should take gold to $2,000 mark… pic.twitter.com/K4vFHk3pI3
— Rashad Hajiyev (@hajiyev_rashad) February 6, 2023
14 leading financial institutions are expressing interest in providing traditional debt funding for De Grey Mining’s (ASX:DEG) monster gold development in WA’s Pilbara region.
Most have indicated that Mallina supports funding of about $800m based on the September 2022 Pre-Feasibility Study, which had estimated capital costs at about $985m.
Expected average annual gold production is estimated to hit 540,000oz per annum during the first 10 years – most of it from Hemi, with total production expected to hit 6.4Moz during the current planned 13.6 year mine life.
Payback on the project is expected in less than two years.
A DFS is due mid-year. The project financing process is expected to conclude in the second half of 2023.
Here’s how ASX-listed precious metals stocks are performing:
Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop.
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