Gold price struggles for progress as China’s demand slows, Australian dollar strengthens
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The Australian dollar price of gold has slipped back to levels a year ago at $2,349 per ounce ($US1,824/ounce) and down from its August 2020 all-time high of $2,845 per ounce.
Analysts are starting to express concerns that gold in US dollars could soon breach the psychological point of $US1,800 per ounce as it continues to underperform other assets.
“It is surprising in some way if you look at the performance of crypto,” Sean Lusk, co-director at Walsh Trading told Kitco news.
One strong headwind holding back gold prices is a soaring yield on US 10-year bonds which has hit 1.2 per cent, its highest for a year, and represents a higher yield for this asset class.
“As yields moved higher, it triggered buying in the dollar, which has taken an edge off gold,” Kitco Metals global trading director, Peter Hug, said.
Gold market experts warn that the yellow metal’s price could see further downside if it breaks through $US1,800 per ounce as long position holders may liquidate their gold holdings.
Hug said higher premiums for obtaining physical gold may be weighing on the gold price as the US Mint has halted production of its American Buffalo bullion coins.
“Retail investors are becoming less enthusiastic about chasing premiums in both silver and gold. There has been a hiatus in the physical buying market over the past few days,” he said.
One complicating factor for the physical gold market maybe the Lunar New Year holidays in China this week which means there is an absence of Asian buyers for gold.
China’s consumption of gold declined by 18 per cent year on year in 2020 to 820 tonnes, and the Asian country’s gold production dipped 4 per cent last year to 479.5 tonnes, said Chinese news agency Xinhua which quoted Beijing’s Ministry of Industry and Information Technology as its source.
The Australian dollar has been appreciating in value against the US dollar which can have a bearish effect on gold prices in Australian currency.
The Australian currency unit was trading at US$0.77 Monday, up from its March 2020 low of $US0.58.
Apollo Consolidated (ASX:AOP) gained strongly in morning trade as it unveiled new gold zones and targets for drilling at its Lake Rebecca gold project east of Kalgoorlie in WA.
Drilling around the margins of the project area last February located new gold mineralisation in the footwall of the prospect’s high-grade Jennifer structure.
Hits for the drilling included 12m at 2.76 grams per tonne (g/t) gold, and 16m at 4.12 g/t gold, and will be investigated further by the new round of drilling.
An updated mineral resource estimate is planned for the Lake Rebecca project in the June-ended quarter which has a current resource of 775,000 ounces for gold.
Stockbroker Argonaut said in a note that “significant upside remains for Apollo Consolidated, primarily on the exploration front”.
Genesis Minerals (ASX:GMD) was another strong gaining gold stock in early trade after assay results confirmed the presence of a robust zone of shallow gold mineralisation at its Clark deposit, part of its Ulysses gold project near Leonora in WA.
An upgraded mineral resource estimate is due for the Ulysses gold project later in the March-ended quarter, and further drill target zones have been identified.
The Clark deposit was included in the company’s transformational acquisition of the Kookynie tenements last June and forms a cluster of deposits within the Ulysses to Orient Well structural corridor that is being systematically drilled by Genesis Minerals.
“We are pleased to see further consistent strong, shallow zones of gold mineralisation intersected within and around the 31,000 ounce Clark deposit, which is located along strike from the Admiral, Butterfly and Orient Well deposits on the Kookynie tenements,” managing director, Michael Fowler, said.
Further high-grade gold mineralisation has been intersected by Sky Metals (ASX:SKY) at its Hume target within its Cullarin project and at its Caledonian project.
Drilling will continue to test open, high-grade mineralisation in the north-west plunge of the Hume target where 10 drill holes have been completed.
“Results from the Hume gold target continue to validate Sky’s approach to targeting the interpreted high-grade structure,” said chief executive, Mark Arundell.
“Continued diamond drilling at Hume is part of the company’s aggressive exploration program focused on drill testing high potential targets,” he added.
At its Caledonian project, Sky Metals has tested two parallel zones of gold mineralisation approximately 500m long and 50m wide over the historic Caledonian gold mine.