Gold price settles into narrow trading range, silver comes alive on speculative interest
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Gold has settled into a narrow $US45 trading range for the past three weeks after jumping up to $US1,950 per ounce in early January on bullish inflation expectations.
The yellow metal was trading Friday at $US1,844 per ounce ($2,401/ounce) and mid-way between its recent three-week high and low range of $US1,825-$US1,870 per ounce.
The roll-out worldwide of vaccines to counter COVID-19, signs of renewed strength in the US dollar albeit from weak levels, and record high US equity prices are weighing on gold’s price.
“Strength in equity markets, coupled with rising optimism regarding the incoming Biden administration, are headwinds for precious metals in the short term, with gold’s weakness over the past fortnight coinciding with Democrat victories in the Georgia Senate election run-off,” said the Perth Mint’s manager of investment research, Jordan Eliseo.
Added to these bearish factors for gold is a recent spike in US 10-year bond yields to more than 1 per cent that has attracted investors away from gold which pays no income.
The 1 per cent yield mark has made investors sit up and notice, as it could herald higher inflation after all the efforts of central banks to increase liquidity in currency markets.
“This is a big psychological level that many will view as evidence that inflation is coming,” FXStreet analyst Ryan Miller said.
The Perth Mint’s Eliseo said the COVID-19 pandemic remains an ‘X-factor’ for the gold market, as even a successful vaccines roll-out represents a huge challenge in logistical terms, and global economic output is unlikely to recover for some years.
“Markets are pricing in a best-case scenario right now. If the situation deteriorates, expect risk assets to suffer, policy makers to deploy even more stimulus, and safe haven assets like gold to catch a bid,” he said.
Another X-factor for gold is the price of cryptocurrency Bitcoin, which has been attracting interest from institutional investors.
Over in silver, a group of the white metal’s enthusiasts on internet forum Reddit are focusing their efforts on the silver derivatives market.
This is after short sellers in US computer game retailer GameStop (NYSE:GME) were forced to cover their positions as the stock rose to astronomical levels.
The Reddit silver enthusiasts called on their followers to buy silver derivative and futures contracts to squeeze short positions in the silver market.
A wave of buying in silver’s derivative markets could trigger a rise in the metal’s price thereby forcing short sellers to cover their positions as happened with GameStop.
The price of one silver market derivative, iShares’ Silver Trust (NYSE:SLV) increased by 5.5 per cent Thursday to $US24.72.
Physical silver prices were trading at $US26.50 per ounce ($34.50/ounce) Friday, and reached $US29 per ounce last August.
Some market analysts are sceptical that Reddit’s stock traders will be able to repeat their success in GameStop in the silver derivatives market.
“Short-squeezing a stock with short interest of 140 per cent is one thing, but short squeezing a physical commodity where market-ready stockpiles are three times average daily futures volume is another,” BullionVault director of research, Adrian Ash told MarketWatch.
Shares in Cardinal Resources (ASX:CDV) had one last hurrah Friday, rising slightly to $1.07 per share, before the company is delisted from the ASX following a takeover.
The West Africa-focused gold explorer with a project in Ghana has succumbed to Chinese gold miner Shandong Gold Mining which has acquired 95.6 per cent to its shares.
Notices have been posted to Cardinal Resources’ remaining shareholders telling them that Shandong Gold intends to compulsorily acquire their shares.
The move brings down the curtain on a long-running takeover battle for the ASX gold company that started in March and saw its value rise to $593m.
Shandong Gold Mining won the battle for Cardinal Resources with its winning takeover offer priced at $1.075 per share, outbidding UK-listed, Russian gold miner Nordgold.
Silver explorer Mithril Resources (ASX:MTH) saw its share price move slightly higher Friday after raising $5m for further exploration of its Cometa and Reyes projects in Mexico.
The company is now fully-funded to continue its drilling program for 10,000m in 2021 to deliver a maiden Jorc resource for its silver projects in Mexico’s Copalquin mining district.
Drilling will carry on at the company’s Refugio and La Soledad targets at its Cometa project, and move on to its Reyes project in February.
The ASX gold company gains $475,000 from the divestment and there is the promise of a further payment of $1.5m on delivery of 500,000 ounces of Jorc gold resources.
“The transaction enables Sunstone to retain some exposure to the Southern Finland gold assets while allowing us to be fully-focused on unlocking the huge potential of our Ecuadorian assets,” managing director, Malcolm Norris, said.
The company intends to focus on developing its Bramaderos and El Palmer copper-gold projects in Ecuador and a lithium project in Scandinavia.
“These additional gold properties in the south-central part of Finland have exceptional geological qualities which complement the Tampere gold project acquired by New Peak several months ago,” New Peak Metals managing director, David Mason, said.