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Spot gold past $US1,800 mark, is the breakout happening?
Mining
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Gold prices have galloped past the $US1,800 an ounce mark again after last week’s brief foray, with spot gold now joining the party.
Spot prices for the precious metal are currently at $US1,810.10 an ounce, up from Tuesday’s close of $US1,793.25 an ounce, while gold for August delivery is trading at $US1,819.60 an ounce.
The Australian spot gold price at the Perth Mint is $2,599.22 an ounce thanks to the still favourable US dollar to Australian dollar exchange rate.
This comes as investors jumped onto physically-backed gold Exchange Traded Funds (ETF), which the World Gold Council noted had recorded their seventh consecutive month of positive flows.
Gold-back ETFs added 104 tonnes (worth $US5.6bn) in June, taking total global holdings to an all-time high of 3,621 tonnes.
Hedley Widdup, investment manager at Lion Selection Group, suspects that $US1,800 an ounce is an emotional barrier and that it is a good sign for gold if it holds above that level.
“The chorus of previously bearish analysts is increasing with calls of prices that would be well into record territory, and reasons for gold to fall have diminished substantially,” he told Stockhead.
Gavin Wendt, senior resources analyst and founding director of MineLife, added that the positive momentum that gold is enjoying is not a new phenomena.
“indeed it can be traced back to 12 months ago, when gold was trading at $1400 an ounce. What we’ve seen since is greater investor buying on economic concerns, even as equity market were hitting record highs,” he told Stockhead.
“The recent COVID-19 pandemic has merely reinforced gold’s momentum, particularly when combined with massive central bank stimulus around the world.”
London Capital Group has advised investors to hold 15 per cent of their portfolio in gold with its head of research Jasper Lawler telling Kitco News that gold could “meander higher” to $US1,850 an ounce before investors started thinking about profit taking.
“My confidence in gold, won’t be rocked by a few tens-dollars movements,” he added.
“I think we have to get a much more substantial pullback to undo the idea that we had a multi-year base and that we’ve broken out of it.”
Chances of hitting new heights
It is the first time since the run-up to all time highs in 2011 that prices are trading above $US1,800 an ounce.
However, that run up to a high of about $US1,920 an ounce was unsustainable and prices fell quickly after hitting that mark to close at $US1,898 an ounce.
Gold tested the $US1,800 an ounce mark three times after that before entering a multi-year correction that culminated in a low of $US1,040 an ounce at the end of 2015.
The current gold rally is powered by governments across the world introducing stimulus programs to counter the economic impact of the COVID-19 pandemic.
With the virus continuing to run unchecked in several countries, including the US, there is considerable support for the belief that gold could beat previous records and go even further.
Gold plays are climbing
The strong gold price and positive news out have sent shares in several companies north today.
Antipa Minerals (ASX:AZY) is up 15.4 per cent this morning to 2.6c after signing a $30m farm-in agreement with IGO Limited (ASX:IGO).
IGO will fund an initial $4m in exploration within 2.5 years from commencement on Antipa’s wholly-owned tenements in Western Australia’s Paterson province.
This will be managed by Antipa.
IGO will then have an option to spend a further $26m within 6.5 years to earn a 70 per cent interest in the tenements with management of the exploration programs to be determined by IGO.
If this is completed, IGO will then free-carry Antipa to the completion of a feasibility study.
As part of the agreement, IGO will acquire a 4.9 per cent interest in the company by subscribing for $3.27m in shares priced at 2.75c each.
In addition, Newcrest Mining (ASX:NCM) will maintain its 9.9 per cent stake in Antipa by subscribing for $358,909 in shares on the same terms.
Meanwhile, Focus Minerals (ASX:FML) has increased resources at its Coolgardie project by 81 per cent to 2.66 million tonnes grading 1.62g/t gold, or 139,123 ounces of contained gold.
It is now updating its 2017 pre-feasibility study with the new resource and the more favourable gold price.
The company says this could pave the way for a return to mining at Coolgardie.
Shares in Focus are up 10.4 per cent this morning to 26c.
Classic Minerals (ASX:CLZ) has intersected a new high-grade gold lode west of the main contact zone at its Kat Gap project in Western Australia.
Notable results include 1m at a jaw-dropping 304 grams per tonne (g/t) gold from a depth of 82m within a broader intercept of 4m at 76.72g/t from 79m and 1m at 30g/t from 51m within a 3m interval grading 10.97g/t from 50m.
Classic will carry out further deeper drilling to determine the extent and significance of this new potential footwall gold lode.
