Saxo Bank: Long-term case for gold strong despite bad few weeks
Bottom Line: Amid gold’s failure to rally these past few weeks, Saxo sees parallels with the 2008 financial crisis – when gold initially suffered a 27% sell-off to $725/oz before rallying to $1920/oz within three years. Noting that the U.S. 10-year real yield, which typically has an inverse relationship with gold, has risen sharply during the past week, Saxo said this direction is unsustainable and that yields will eventually move back into a deeper negative territory. It also noted that the cost of fuel, which accounts for 20% of mining cost, has collapsed, meaning gold miners are not suffering to the extent the drop in gold would imply.
IHS Markit sees gold prices falling to $1,300/oz – and possibly even lower
Bottom Line: In contrast to Saxo’s bullish stance, IHS Markit sees gold prices falling to $1,300/oz in the second half of the year as investors continue to hoard cash. Speaking to Kitco, precious metals analyst KC Chang said that if economic projections continue to weaken, gold prices could even fall back to 2015 lows of around $1,050/oz. With five-year inflation expectations likely to drop as low as 1%, there is no real urgency to buy gold, Chang said. While there may be some upward price volatility in gold as a safe-haven asset, many retail and professional investors will struggle to find the capital to buy gold, he said.
Kirkland Lake Gold announces share repurchase plan, doubles quarterly dividend
Bottom Line: Kirkland Lake Gold
Newmont ramping down Peru operations due to coronavirus restrictions
Bottom Line: Newmont
Barrick announces plans to make Veladero a Tier One mine
Bottom Line: Barrick Gold
Agnico Eagle, Sabina suspend Nunavut operations over coronavirus
Bottom Line: Agnico Eagle
Junior makes major gold discovery in Australia’s iron ore-rich Pilbara region
Bottom Line: De Grey Mining
Market Recap and Outlook
It was a challenging week for gold miners, as it was for the gold price. The VanEck Gold Miners ETF ($GDX), which measures the performance of the largest gold miners, fell approximately 5% since Thursday close last week. The gold price fell 6.7% in the week to Thursday close, ending at $1,471/oz (before gaining back some ground at the start of Friday trading). In the same five-day period, the US Dollar Index, which typically has an inverse relationship with gold, rose 5.4%.
Meanwhile, fund managers’ net-bullish positioning in gold futures fell modestly last week, with a bigger drop expected when the Commodity Futures Trading Commission releases figures late Friday Eastern Time.
The consensus view is that gold has lost its status as a safe-haven asset as investors hoard cash amid dismal economic data and the spread of the coronavirus. Gold rallied for a short time on Monday after the Fed’s emergency one-point rate cut, but soon succumbed to bad news including the largest-ever drop in the Philadelphia Federal Reserve’s manufacturing business outlook.
Until last week, gold had managed to avoid the meteoric falls suffered by most other metals amid panic over the coronavirus. The big question now is: will gold regain its status as a safe-haven asset in these terribly uncertain times? As the first two items in this roundup show, analysts are split on the answer to that question.
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