Gold Digger: Three reasons gold will hit $US2300/oz in 2021

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Precious metals began 2021 on a positive note: gold, silver and palladium prices returned to higher levels while platinum hit fresh four-year highs.

Some of those gains have been unwound, but Metals Focus says the yellow metal is still expected to approach $2,300 later this year – an all-time high.

Here’s why.

1. COVID-19 and China are still a thing

When uncertainty and volatility abound, gold shines.

The ongoing pandemic and policy-makers’ reactions to the crisis will continue to boost investors’ appetite for safe haven assets such as gold.

“In the near-term, the rapid spread of COVID-19 and the threat of new variants of the virus mean that restrictive measures will remain in place in many countries, especially in Europe, for a longer period than previous anticipated,” Metals Focus says.

“More importantly, with slower than expected roll-out of the vaccine, a return to normality seems unlikely to emerge until the second half of this year.”

And geopolitical risk is still high.

Even under the Biden Administration the US-China relationship is likely to remain difficult, albeit less volatile, while geopolitical risks elsewhere are still abundant, says Metals Search.

2. Low interest rates make gold attractive

Lower interest rates – designed to help economies regain growth momentum — typically benefit precious metals by reducing the ‘opportunity cost’ of holding other, currently low yielding assets.

“Ultimately, this will reduces bonds’ effectiveness as a portfolio diversifier, which will continue to push long-term investors towards gold,” Metals Focus says.

3. The inflation situation

A Democrat clean sweep in the US should be positive for gold prices, given the potential for larger fiscal spending and hence their implications on future inflation, says Metals Focus.

Inflationary expectations, sparked by the huge amounts of money flowing into the system, were a key driver of the post-2008 gold rally, it says.

“Even though high inflation never materialised, many investors feel that, this time around, the extent of monetary and fiscal accommodation may have a greater likelihood of driving prices higher,” it says.

“This remains the case, even if the most recent “risk-on” move has put short-term pressure on the gold market.

“We can also not ignore still ballooning sovereign debt levels and already high systemic risks.”

Winners & Losers

Here’s how ASX-listed gold stocks performed January 4 – January 8 [intraday].

Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop:

VIKING MINES (ASX:VKA) +64%

It was a news-heavy week for this $20m market cap minnow.

On Monday it appointed new chief exec Julian Woodcock – a geologist with a proven history of discovering and developing new projects.

On Friday it picked up more ground near its high grade First Hit gold project in WA, where drilling in the 2000’s intercepted high grades like 9m at 64.7g/t just below a historic resource.

ANTILLES GOLD (ASX:AAU) +53%

In May last year, Antilles – formerly PanTerra — finalised a joint venture to develop the La Demajagua gold-silver deposit in Cuba.

PanTerra wants to produce ~60,000 tonnes a year of concentrate grading around 47 grams per tonne (g/t) gold and 380g/t silver for at least six years.

A 25,000m drilling program kicks off this month to establish JORC resources. Feasibility studies for the stage one open pit mine should be completed by Q3 2022, Antilles says.

PURSUIT MINERALS (ASX:PUR) +52%

Pursuit began listed life as a gold explorer Riviera Resources in 2008, then became iron ore miner SAFM in 2010.

Low iron ore prices killed that dream. A reskinned Pursuit emerged in 2017 with a base metals focus, which evolved into vanadium (2018), nickel (2020) back to gold (2020) and then nickel copper PGE’s (late 2020).

Whew.

Any share price moves at the moment can probs be attributed to the company’s Warrior nickel copper PGE project which is a proverbial stone’s throw from Chalice’s (ASX:CHN) world class Julimar discovery near Perth in WA.

RED MOUNTAIN MINING (ASX:RMX) +50%

Why did Red Mountain’s share price spike on no news this week?

There are four possible reasons, the company says.

One: drill results from a maiden drill program at its high grade Mt Maitland gold project are expected on or after Tuesday, 12 January.

 Two: access agreements for its Koonenberry gold project in NSW — adjacent to Manhattan Corporation’s (ASX: MHC) recent discovery — are expected around the middle of January.

Three: “The recent bullish increase in the gold price.”

And four: “The strong sentiment towards rare earths” as Red Mountain prepares to punch more holes into its Mt Mansbridge rare earths project in WA.

S2 RESOURCES (ASX:S2R) +46%

S2 Resources (ASX:S2R)  – also known as ‘the crew that unearthed the world-class Nova deposit’ — took a share price hit after drilling a December duster in the Fraser Range of WA.

The explorer has now pared much of those losses after announcing significant gold hits at its recent gold discovery in Finland.

Highlights include 8m at 4.8g/t gold, 575m from a previous high grade intercept of 6.85m at 11.8g/t gold.

If they connect up this could be a decent sized gold system.

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