Ground Breakers: Gold breaks through US$1800 as investors punt on bullion

Rejoice! Gold climbs above US$1800/oz
ASX gold stocks greener than a cricket pitch in the New Zealand spring
Mining (mini) boom back? Materials sector up almost 15% over the past month

Gold miners are in the crosshairs of investors after prices climbed more than 1% to jump above the US$1800/oz mark.

It came after a talk from US Fed Governor Michelle Bowman, who insisted inflation remained too high, but suggested the pace and severity of interest rate rises would come down in the coming months.

The US economy has weathered the storm of four successive 75bps rises this year as inflation hit levels not seen in decades.

“Moderating the pace and the level of rate increases will allow us to more fully assess the effects of our past monetary policy actions,” Bowman told delegates at the KBW CEO Strategy Forum.

ANZ rates strategist Jack Chambers said US economic indicators were showing activity was starting to slow.

“The US economic slowdown is also deepening. Manufacturing contracted in November for the first time since May 2020, with ISM’s Factory Activity Index sliding to 49,” he wrote in a note to clients.

“This takes the pressure off the Fed to keep hiking rates aggressively.”

Misery loves company and gold and misery go hand in hand. Geopolitical instability like we’re seeing at the moment tends to play into gold’s investment thesis (known as safe haven demand).

Rate rises, which increase the value of cash and the US dollar, don’t.

The party could go on further for gold if non-farm payrolls, due tonight, are weaker.

“Leading labor indicators have been mixed but overall support a weaker pace of hiring,” OANDA senior market analyst Americas Ed Moya said.

“Unless the nonfarm payroll report shows companies are clearly still in hiring mode, gold could remain in rally mode.”

Who’s up?

As Slick Rick says at the start of legendary 1988 rap hit Children’s Story, ‘Heeeeere we go’.

The gold sub-index is up 2.62%, having climbed more than 1000 points in a month to its strongest position since June.

Silver Lake Resources (ASX:SLR) is up 6.45%, with Capricorn Metals (ASX:CMM) climbing 4.72%, Bellevue Gold (ASX:BGL) rising 2.35%, and Gold Road (ASX:GOR), Perseus (ASX:PRU) and West African Resources (ASX:WAF) all higher.

Leading the large cap is the biggest dog in the Aussie gold yard Newcrest Mining (ASX:NCM) (+3%), with Evolution Mining (ASX:EVN) and Northern Star (ASX:NST) seeing all of the Ozzie Big 3 in buying mode.

Battery metals stocks Allkem (ASX:AKE) and Lynas (ASX:LYC) were also there or thereabouts.

Singapore iron ore was up slightly to a tick over US$102/t, but the materials sector took a breather, down 0.55% in morning trade after a strong week which has seen it lift 4.14% on hopes China will emerge from its demand-killing Covid Zero policy sooner than expected.

Materials stocks have outperformed the market strongly over the past month, up 14.32%.