Precious Metals Weekly Round-Up: Gold Finally Breaks US$1,400

Gold climbed close to 2 percent on Friday morning (June 21), rising above US$1,400 per ounce to reach as high as US$1,410.78.

The yellow metal began its ascent after the US Federal Reserve indicated on Wednesday (June 19) that it will be maintaining current interest rates for now, but may cut rates as early as July.

“The driver for the surge is obviously the Fed delivering the dovish tilt that the market was looking for. It removed the ‘patience’ approach to cutting rates,” said Ole Hansen, commodity strategist at Saxo Bank. Gold last crossed the US$1,400 threshold in 2013.

In addition to the Fed announcement, the precious metal is being supported by rising tensions in the Middle East.

“There is a perfect mix of ingredients for gold’s rush to the top — a weak macroeconomic environment, low bond yields, soft dollar and rising geopolitical tensions,” Howie Lee, an economist at OCBC Bank (SGX:039), told Reuters.

The yellow metal has managed to climb close to 4 percent so far this week, which is the metal’s biggest rise since the the end of April 2016. Since Wednesday, gold has gained over US$70 and as of 9:11 a.m. EDT on Friday, it was trading at US$1,397.70.

Silver followed gold’s lead after the Fed announcement, but gave up 1.2 percent of its gains by the end of the week.

Even so, many analysts seem to be rallying behind the white metal. In its latest report, FocusEconomics says that analysts it has polled are optimistic about future silver prices.

“Prices should continue to trend higher moving forward. Barring a significant global slowdown, demand for industrial fabrication is projected to rise this year, as should demand for jewelry and silverware fabrication,” the report reads.

The analysts forecast that the silver price will average US$16.20 per ounce in Q4 of this year before rising to an average of US$17 in the fourth quarter of 2020.

As of 9:20 a.m. EDT on Friday, the white metal was trading at US$15.31.

As for the other precious metals, platinum is down nearly 2 percent for the week. As of 9:22 a.m. EDT on Friday, the metal was changing hands at US$799 per ounce.

For palladium‘s part, the metal is up 1.43 percent for the week, but was down just over 1 percent on Friday. As of 9:43 a.m. EDT, palladium was trading at US$1,487 per ounce, putting it above gold despite the yellow metal’s rally.

Precious metals top news stories

Our top precious metals stories this week include South Africa’s Association of Mineworkers and Construction Union (AMCU) asking for a pay increase, gold and silver increasing following the Fed’s two day meeting and shares of Jaguar Mining (TSX:JAG) rising close to 42 percent on Tuesday (June 18).

1. AMCU Wants Wages to Increase by Almost 50 Percent

The AMCU plans to ask for a pay increase of up to 48 percent for its members when it begins upcoming wage negotiations.

In a press release issued by the AMCU last Friday (June 14), the union reported that it is looking for a monthly basic wage of 17,000 rand (US$1,145) for its members, saying that the current price of the precious metal makes the increase warranted.

“As a genuine trade union, AMCU remains committed to working with the mandate of our members, in our quest for social justice and economic emancipation,” the AMCU stated.

2. Gold Price at Highest Level Since 2014 After Fed Meeting

As mentioned, both gold and silver made gains on Wednesday after the Fed announced it will be maintaining current interest rates rather than cutting them. The news caused the US dollar to tumble and the yellow and white metals to rally.

The Fed made its decision after two days of meetings, ignoring pressure from US President Donald Trump to decrease the current interest rate, which is a range of 2.25 to 2.5 percent.

According to Bloomberg, Trump allegedly looked into options earlier this year for getting Jerome Powell removed as Fed chairman, going as far as asking for advice from lawyers at the White House.

3. Jaguar Rockets After Announcing US$25 Million Private Placement

Jaguar Mining rose close to 42 percent on Tuesday after proposing a US$25 million non-brokered private placement.

The company plans to use the funds to make strategic changes and to expand its presence in Brazil. Jaguar will offer shares at a discounted rate of C$0.085 each; its last closing price prior to the announcement was C$0.12 and the company ended at C$0.17 in Tuesday’s session.

“Completion of the offering will result in an opportunity to increase developed reserves, improve and update the capital equipment and infrastructure, increase gold production, expand reserves, reduce expenses per ounce of gold produced, improve efficiencies and cash flow, and reduce the financial distress caused by debt,” said Benjamin Guenther, interim CEO of Jaguar.

Also in the news

Also this week, Bloomberg reported that the National Union of Mineworkers (NUM), which dominated organized labor across South Africa’s platinum belt until 2012, is poised for a comeback.

According to NUM President Joseph Montisetse, the union would like to represent 30 percent of workers at the world’s four biggest platinum producers by the end of 2019.

Currently, the NUM represents 18 percent of Impala Platinum’s (JSE:IMP) workforce and 11 percent at Lonmin (LSE:LMI). Figures were not provided for Anglo American Platinum (LSE:AAL) or Sibanye-Stillwater (NYSE:SBGL,JSE:SGL), which is taking over Lonmin.

“We have a clear target. I’ve appointed myself to platinum,” stated Montisetse.

Additionally, shares of Silver Mines (ASX:SVL) rose close to 9 percent on Friday when the company announced that the environmental impact statement (EIS) for its Bowdens silver project is now in the final stages before submission to the New South Wales Department of Planning and Environment.

The EIS shows that the project will have minimal impact on surface water and groundwater and will have local economic benefits. A new pipeline will be built to provide water for processing and there is a progressive rehabilitation plan in place for the mine.

Life-of-mine production is expected to create approximately 53 million ounces of silver, 116,000 tonnes of zinc and 83,000 tonnes of lead.

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