Gold price recovers to $US1,707 per ounce but struggles with rising US bond rates
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Jitters about rising US government bond yields continue to unsettle the gold market as the price recovered to just over $US1,700 per ounce to start the week.
Gold was trading at $US1,707 per ounce ($2,215/ounce) Monday, and is now 16 per cent off its peak of $US2,032 per ounce back in August at the height of the COVID pandemic.
Rising yields on US 10-year Treasury securities at 1.55 per cent coincide with the US Congress passing a $US1.9 trillion ($2.45 trillion) spending package for the ailing US economy.
Analysts are interpreting the rise in bond yields as a market signal that inflation may be on the way as economies spring back to life as the threat of COVID-19 recedes.
Dovish comments by Federal Reserve chairman Jerome Powell last week about inflation and the US central bank’s relaxed approach to rising bond yields are also affecting gold.
“Powell’s failure to push back on the recent rise in bond yields took away the lustre of holding gold. It has provided a short-term bullish outlook for the dollar which is weighing on gold,” OANDA senior market analyst, Edward Moya, told Kitco news.
“If we get north of 1.75 per cent and flirt with 2 per cent, that would be significant,” said Kitco Metals global trading director, Peter Hug, on the implications of higher bond yields.
Gold’s price is also being checked by rising COVID-19 vaccination rates which could foreshadow a gradual reopening of economies and a relaxation of travel restrictions.
Israel is leading the way with 98 vaccine doses administered per 100 people, followed by the United Arab Emirates at 63 doses per 100, and the UK at 34 doses per 100 people.
Chinese consumers increased their purchases of gold items such as jewellery during February’s Lunar New Year holiday as they were encouraged not to travel during the festival.
Sales of gold jewellery rose 160 per cent during the Chinese holiday and gold bullion sales jumped 80 per cent year on year, said the World Gold Council.
Investors in exchange-traded funds for gold liquidated some holdings in February, leading to an outflow of 84.7 tonnes from the sector last month, said the World Gold Council.
At the end of February, investors held 3,681 tonnes of gold in ETFs valued at $US207bn.
At the Perth Mint, demand for physical bullion soared in February, with sales at 124,000 troy ounces for gold, and 1.8 million troy ounces for silver, a rise of 400 per cent and 200 per cent, respectively, on February 2020’s sales.
“The pullback in prices [for gold and silver] has led to a spike in demand for Perth Mint minted products, with gold and silver sales rising noticeably over the last month, while investor holdings in The Perth Mint Depository were broadly flat across the month,” said Jordan Eliseo, manager for listed products and investment research at the Perth Mint.
Alto Metals (ASX:AME) has discovered a new zone of gold mineralisation at its Sandstone gold project.
The new gold zone was detected 1,000m south of the historic Lord Nelson Pit and along the Lords Corridor where no previous drilling activity has taken place.
Hits at the new zone include 4m at 5.3 grams per tonne (g/t) gold and are interpreted as a second new lode of mineralisation 400m along strike from a first lode discovery.
“These new results from the successful first pass ‘step-out’ exploration holes drilled late last year have confirmed two new lodes, within a new zone of gold mineralisation discovered more than 1 km south of Lord Nelson,” managing director, Matthew Bowles, said.
Kingwest Resources (ASX:KWR) has updated its mineral resource estimate for its Menzies gold project to 446,200 ounces at 1.3 per cent g/t gold.
The upgrade follows an extensive infill drilling campaign that resulted in a 170 per cent increase in indicated resources above a 1 g/t gold cut-off for the project near Kalgoorlie.
“The successful completion of the infill drilling allows the finalisation of optimisation work in the scoping study which will be released soon,” chief executive, Ed Turner, said.
OzAurum Resources (ASX:OZM) announced an outstanding intercept of 4m at 10.26 g/t gold within 10m at its Mulgabbie North gold project in WA.
The result follows drilling at the project located 2km from Northern Star Resources (ASX:NST) Carosue Dam operation.
The intersect was from drilling results for nine holes for 1,929m and showed that high-grade mineralisation at the project is open along strike and at depth.
“The wide zones of hematite alteration intersected for the first time in some deeper holes is very promising since this is a key signature of the adjacent Northern Star Karari and Whirling Dervish gold mines,” chief executive, Andrew Pumphrey, said.