Gold Digger: Prices lift off on growing inflation

Growing concerns about inflation could send gold prices soaring back above the US$2,000 ($2,746) an ounce mark it last reached back in 2020.

Prices of the precious metal have already been rising steadily over the past fortnight, up some 3.7% to the current price of about US$1,858/oz.

DailyFX analyst Warren Venketas told Kitco News that he was looking out for inflation expectations outperforming the move in yields and that he was very bullish about gold, which is set up perfectly for a rally.

“There is a very strong case for the year-end gold rally,” Venketas said.

“That second-round impact of the price increases will last into the second half of 2022. Inflation is here to stay for the next six months or so. It is transient but it will be more prolonged than initially forecasted.”

While US Federal Reserve chairman Jerome Powell has maintained that the central bank will take its finger off the trigger on raising interest rates in order to prioritise reaching full employment over fighting inflation, markets often overact to data.

The Federal Reserve is due to hold its December monetary meeting soon with all eyes on the US inflation and employment data.

“Everything is data-dependent,” Venketas added. “Leading up to the December meeting, inflation and employment figures are going to be key.”

MKS PAMP GROUP adds that gold is still a cheap hedge against inflation when compared against cryptocurrencies.
 

Inflation trigger

US data released yesterday showed that the consumer price index had climbed 6.2% in the 12 months to October, the highest yearly jump since the 1990s.

It also rose 0.9% in the month of October alone with Australian economist Saul Eslake telling the ABC that the rise was higher than market expectations.

“Whether it’s putting gas, as they call it, into their cars. Or the cost of living in the homes which they either own or rent. The cost of health insurance and medical care. The cost of buying used cars, in particular,” he added.

This is thanks largely to rising energy prices caused by the crisis in Europe and Asia with the energy index – which includes petrol, gas and electricity – rising 30% over the same period, the highest increase since 2005.

Energy costs have also driven Australia’s inflation rate up.
 

Winners & Losers

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Weekly Small Cap Standouts

Nexus Minerals (ASX:NXM) +28%

Shares in Nexus climbed this week after striking visible and high-grade gold at the Templar prospect within its Wallbrook gold project in Western Australia.

Not only do the results suggest a link between the Templar and the Crusader prospects some 1.2km apart, comparisons have also been made to Northern Star’s (ASX:NST) nearby multi-million-ounce Carosue Dam gold operations.

Labyrinth Resources (ASX:LRL) +24%

Rock chip sampling proved to be a winner for the company after a 4.45kg sample returned a eyebrow-raising assay of 33.2g/t gold and 21.1g/t silver.

While this is still early stage exploration, the sample is an indication that its Denain gold project in Quebec, Canada, is a potential host for high-grade mineralisation.

Chesser Resources (ASX:CHZ) +19%

Final metallurgical work from Area D of the company’s Diamba Sud gold project in Senegal has returned strong average recovery of 96% using direct cyanide leaching.

The high recoveries from the full testwork program show that the gold is likely to be recoverable via a simple cyanide leach process flow sheet, with no indications of refractory gold.

A maiden resource over Area A and D are expected to be released this month.