Adrian Day: Gold Stock Investors Capitulating, Dramatic Change Coming Soon

Bullet briefing — Gold revaluation, China buying, streaming deal

Fed publishes gold revaluation article

The Fed turned heads in the resource space this week with the release of an article on gold revaluation. In it, a principal economist looks at "rare cases when countries used proceeds from valuation gains on gold and foreign exchange reserves."

While precious metals market watchers have noted that the Fed publishing research on gold revaluation doesn't mean it's going to happen in the US, it's still seen as significant that the central bank is mentioning it at all.

China snaps up gold, platinum

The People’s Bank of China continued snapping up gold in July, adding to its reserves of the yellow metal for the ninth month in a row. According to Bloomberg, the Asian nation now holds 73.96 million ounces of gold, an increase of 60,000 ounces over the course of the month.

China is also reportedly adding to its platinum holdings, with data from Standard Chartered (LSE:STAN) showing that it brought in 1.2 million ounces in the second quarter.

A separate article from Bloomberg indicates that state-owned entity China Platinum is making most of the purchases, meaning it’s difficult to know who is really buying the metal.

The US is picking up platinum too, while London and Zurich are seeing shortfalls of the metal. With the implied one month lease rate down from over 35 percent last month, but still elevated at 10 percent, experts are calling for continued tightness in the market.

After years of rangebound trading, the platinum price began breaking out in mid-May, eventually surpassing US$1,470 per ounce and reaching highs not seen in over a decade.

First Quantum's US$1 billion gold stream

First Quantum Minerals (TSX:FM) will receive a US$1 billion upfront cash payment from Royal Gold (NASDAQ:RGLD) under a gold-streaming deal for its Kansanshi mine.

According to First Quantum, the agreement, announced on Tuesday (August 5), will allow it to retain exposure to all of the asset's copper output and most of its gold production.

Located in Zambia, Kansanshi is the company's flagship operation, as well as Africa's largest copper mine. The asset produced about 170,000 metric tons of copper and 105,000 ounces of gold in 2024, with an expansion in the final stages of commissioning.

The amount of gold First Quantum delivers to Royal Gold will be based on its copper output. In addition to the US$1 billion initial payment from Royal Gold, First Quantum will receive 20 percent of the gold spot price for each ounce delivered, with that amount rising to 35 percent in the event that specific milestones are met. The arrangement includes acceleration provisions as well.