Gold Digger: Where do we go from here?
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It’s been a frustrating few months for gold bulls.
As an investment hedge, gold shines during periods of poor or volatile market sentiment. It loves drama like pandemics, civil wars, or the unprecedented failure of the Lehman Brothers in 2008.
Now, the unwinding of economic support measures by central banks as global markets recover are dimming gold’s status as a ‘safe haven’.
After punching though that psychologically important $US1,800/oz mark recently, gold was down nearly 3% on Thursday as strong US retail sales data boosted the dollar.
Gold also often falls when the value of the USD goes up relative to other currencies worldwide.
Retail sales in the US unexpectedly rose 0.7% month-on-month in August — handily beating market forecasts of a 0.8% drop — giving ammo to those experts saying the Federal Reserve may hasten the unwinding of economic support and boost rates to help control inflationary pressures.
The strong retail sales figures show “consumer sentiment is starting to come back, a good indicator for the Fed to bring in those expectations on the next rate hike,” said Phillip Streible, chief market strategist at Blue Line Futures told Reuters.
An expected interest rates hike in the medium term could also translate to increased ‘opportunity cost’ of holding non-yielding assets like bullion.
Opportunity cost would be the potential losses suffered by not investing in something more appetising, like uranium stocks.
The next key moment for gold will be the Federal Reserve’s September 21-22 policy meeting.
So, what’s next? Opinions on the outlook vary widely.
“There are a lot of members in the FOMC in favour of commencing tapering this year, and therefore the outlook for gold is not positive,” said Quantitative Commodity Research analyst Peter Fertig.
Meanwhile, Metals Focus believes that despite growing expectations of monetary tapering in the US/Europe, “rate hikes may not occur as early as some anticipate, which should benefit non-yielding assets such as gold”.
“As nominal yields remain low and real yields negative, a lack of meaningful returns on key reserves currencies should favour gold’s role as an effective portfolio diversifier,” it says.
Also of importance will be geopolitical factors, Metals Focus says.
“Since President Biden’s inauguration, tensions between the US and its geopolitical rivals have shown little sign of easing.
“Going forward, for some countries a desire to cut exposure to dollar-denominated assets will continue to justify a rotation into gold.”
Here’s how ASX-listed gold & silver stocks are performing:
Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop
Kingwest is now up 64% since announcing a gold discovery under a WA salt lake called ‘Goongarrie’ on Monday.
Exploring for gold underneath salt lakes is tough, which is probably why so many remain underexplored — regardless of how prospective they are.
That is why early results like 3m @ 6.5g/t gold and 3m @ 4.1g/t gold from Kingwest are so important.
“These results support our targeting for a potential major discovery which we have named the ‘Sir Laurence’ Prospect,” CEO Ed Turner says.
“We have just scratched the surface of bedrock mineralisation at this stage.
“I look forward to receiving the outstanding assays as well as planning follow up drilling along strike within Target A10, which includes many other similar litho-structural targets.”
The explorer keeps hitting high-grade gold at the emerging ‘Wallbrook’ gold project in WA.
Earlier this month, the previously undrilled ‘Templar’ discovery delivered numerous hits like 10m @ 5.64g/t gold (within 23m @ 2.85g/t Au from 132m).
Templar and the neighbouring ‘Crusader’ target could be part of one giant system, Nexus managing director Andy Tudor says.
“These broad high-grade results received from Templar occur in the same altered and mineralised rocks we see at the Crusader prospect, 1.2km to the south,” he says.
“This has effectively linked the two prospects together into one large mineralised system.”
A 700m deep diamond drill hole at Templar is now underway.
The $86m market cap stock is up ~170% over the past month.
$6 billion market cap Chifeng Gold Mining will buy ~5.8m shares in emerging miner MetalsTech at 34c apiece for a total investment of $2m.
This is a pretty big deal, MTC says.
“Chifeng is widely considered to be one of the most successful precious metals investors in China owing largely to the experience of their chairman Mr Wang Jianhua who before transforming Chifeng, served as CEO of $62bn capped Zijin Mining and before that, chairman of $17bn capped Shandong Gold,” MTC chairman Russell Moran says.
MTC’s 1.5moz (and growing) ‘Sturec’ project could be a world class epithermal deposit, he says.
“We hope that this recent interest from Chifeng is a sign of growing interest in our broader development plans for Sturec.”
MTC also reminds investors that they need to finalise their shareholdings by October 7 to receive free shares in lithium spinout Winsome Resources (ASX:WR1).