Top Stories This Week: Experts Weigh in on Gold, Fed’s Ability to Execute Plans

Better-than-expected US retail sales data sent gold tumbling to about the US$1,750 per ounce level last week, but it neared US$1,800 midway through this week.

Concerns about China’s Evergrande (HKEX:3333,OTC Pink:EGRNF) weren’t enough to support gold, and it was back around US$1,750 at the time of this writing on Friday (September 24) afternoon.

Weighing on the yellow metal this week were highly anticipated comments from the US Federal Reserve. After a two day meeting, the central bank indicated that it could start tapering bond purchases in November, assuming the job market continues to do well.

“Participants generally viewed that so long as the economic recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate” — Jerome Powell, US Federal Reserve

The Fed also said it will aim to start raising its benchmark interest rate next year, although it emphasized that it won’t do that until after bond buying has stopped.

A recurring theme in the conversations I’ve been having is whether the Fed will actually be able to do what it says it plans to do. Popular mining industry figure Ross Beaty is one person who recently shared his thoughts with me — he said that in general people are more confident in rhetoric from the Fed than they should be given the difficult position the central bank is in at the moment.

“This situation we’re in right now — it’s just getting more and more like an inverted pyramid that’s kind of creaking around on a tiny little spot, and it’s going to fall over.

Where and how and when I’m not sure, but I’m just sure it’s going to happen. And when that happens, hang onto your hat and own some gold” — Ross Beaty, Equinox Gold (TSX:EQX,NYSEAMERICAN:EQX)

Ross believes the gold price should be higher given current circumstances, and that sentiment was echoed by Sean Fieler of Equinox Partners — he told me this week that what’s holding it back is the fact that market participants continue to see success with traditional assets.

“I think the fly in the ointment so to speak has been just (that) everybody’s been doing so well owning the same assets they’ve owned for the last 10-plus years — 12 years now at this point since the lows in the stock market” — Sean Fieler, Equinox Partners

In Sean’s opinion, gold will benefit when these more conventional assets start performing less well. Of course, the key question for investors is when that might happen. It’s impossible to be certain, but Sean did say he’s starting to see late-cycle phenomena that indicate a change could be coming.

“What we’re looking at today I think is to me most reminiscent of what we saw in the late ’90s in that you have some very conventional, very pedestrian business models that are getting really extraordinary valuations” — Sean Fieler, Equinox Partners

We’re going to finish this week with nickel, an important metal that we don’t get a chance to discuss very often. INN’s Priscila Barrera recently looked at the Australian market, where company activity has reportedly continued unabated over the last 18 months.

The country’s 12 operating nickel mines are all located in Western Australia, and although the stainless steel industry remains the metal’s top consumer, companies are eager to step up and fill growing demand from electric vehicle (EV) manufacturers.

“The strength in demand and prices as well as the optimism surrounding nickel demand from the battery sector for EVs has supported all of this activity” — Angela Durrant, Wood Mackenzie

Restarts and expansions at the state’s nickel operations are in progress, and with big offtake agreements already in place — like BHP’s (ASX:BHP,NYSE:BHP,LSE:BHP) supply deal with Tesla (NASDAQ:TSLA) — the space could be an exciting arena for investors to watch.

Want more YouTube content? Check out our YouTube playlist At Home With INN, which features interviews with experts in the resource space. If there’s someone you’d like to see us interview, please send an email to cmcleod@investingnews.com.

And don’t forget to follow us @INN_Resource for real-time updates! 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.