Gabelli Gold Fund analyst Chris Mancini shares his thoughts on where gold is headed in the final months of 2018. He also explains why his judgment is still out on the Barrick/Randgold deal.
The gold price is down year-to-date in 2018, and for Chris Mancini, an analyst at the Gabelli Gold Fund, what happens for the rest of the year depends on the dollar.
“What we’ve seen over the past couple of months, when gold went from around $1,320 down to $1,160 at its bottom, was … the dollar strengthen and the gold price weaken. And as the dollar strengthened we saw the net speculative position in dollar futures increase, and then we saw the net speculative position in gold futures decrease,” he said.
Mancini continued, “so funds were buying dollar futures and selling gold futures. And now we’re at this place where gold is oversold, there’s a big short position. But if the dollar keeps strengthening, gold will probably keep weakening. So I think at this point over the rest of 2018 it’s a call on the dollar, and I’m not really sure on the dollar.”
“That’s very interesting … it shows that there’s activity in the sector,” he said. He’s optimistic about the combination, but for now he’s reserving judgment — “if Randgold can … replicate in the new Barrick what it did with Randgold, then this is a fantastic deal,” Mancini explained.
In his opinion, it’s possible that more smaller companies could also begin to merge.
“The market’s just taking any opportunity to slam the stock of a company that’s a single-asset company which doesn’t meet its guidance,” he said. “Even if it’s something that happened for a couple of days during a quarter, the market forecasts that out for the rest of the mine life.”
He added, “and so I think that it is somewhat likely that if the gold price stays here you could see single-asset companies combining to … mitigate that [risk].”
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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