Precious Metals Weekly Round-Up: Gold Up on Bleak Economic Outlook

- March 8th, 2019

Gold was supported by bleak global growth reports that caused the US dollar to slump, while the rest of the precious metals were flat.

Gold prices climbed on Friday (March 8) as the US dollar was cooled by growing concerns around a global economic slowdown after the European Central Bank (ECB) cut its growth outlook and China reported weak data.

The lagging global economic growth boosted demand for the safe-haven nature of the precious metal.

“There are still concerns about the China economy especially when the global demand is weakening and we don’t see a silver lining of immediate recovery in the eurozone as well,” said Margaret Yang, market analyst with CMC Markets, Singapore.

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The greenback’s slump paired with weaker equity markets have sent the price of the yellow metal higher, while a slowdown in growth and increased geopolitical uncertainties are expected to keep prices supported.

The dollar index was down 0.2 percent, having hit a near three-month peak in the previous session after the ECB postponed an interest rate hike until 2020.

The Asian market also slipped to lower levels after surprisingly weak export data from China elevated market fears about global growth.

“ECB’s decision echoed US dollar strength, and we saw risk aversion… I don’t think gold is supported in the longer term,” said Ilya Spivak, a senior currency strategist at DailyFX.

“We have seen a substantial decline in prices since mid-February and the reason for that is the dollar. As we saw risk aversion, we also see haven demand for US dollar outpacing the influence of yields.”

Investors will now turn their attention to the US nonfarm payroll report that will be released later today. The report could signal the future path of Federal Reserve’s monetary policy.

As of 9:54 a.m. EST, gold was trading at US$1,295.60 per ounce.

Meanwhile, silver steadied after slipping to its lowest level since the end of last year in the previous session.

As of 10:18 a.m. EST, silver was trading at US$15.29 per ounce – once again staying below the US$16 threshold.

As for the other precious metals, platinum was up slightly on Friday after finding its lowest since mid-February. The metal was down about 4.7 percent for the week, its biggest percentage decline since end November. As of 10:44 a.m. EST, the metal was trading at US$813 per ounce.

For its part, palladium slipped and was headed for its biggest weekly decline since the week ended November 23.

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Precious metals top news stories

Our top precious metals stories this week includes interviews with top CEOs and mining analysts from the Investing News Network’s attendance at this year’s Prospectors & Developers Association of Canada (PDAC) convention and Newmont Mining (NYSE:NEM) shareholders rejecting Barrick Gold’s (TSX:ABX,NYSE:GOLD) hostile takeover bid.

1. VIDEO — Rick Rule: Here’s Where the Real Money Will be Made in This M&A Cycle

M&A activity has been top of mind for investors at this year’s PDAC convention, and for Sprott’s (TSX:SII,OTC Pink:SPOXF) Rick Rule the trend is positive.

“I think the mergers are a wonderful thing for the mining business and the mining investment business,” he said at the sidelines of the show.

“When a takeover occurs at a premium, the shareholders of the acquired company get liquidity and they get hope — two great ingredients in a market. Intelligent mergers … also benefit the acquirer. Larger companies, more liquid companies, enjoy higher share prices and a lower cost of capital.”

2. VIDEO — Randy Smallwood: Silver Always Lags Gold, but Wait Until it Moves

The Investing News Network sat down with Randy Smallwood, president and CEO of Wheaton Precious Metals (TSX:WPM,NYSE:WPM), at this year’s PDAC convention.

He said 2019 is shaping up to be another successful year for the miner, and offered his perspective on why he’s bullish on gold long term. Smallwood also explained why he thinks that palladium is “the most precious of the precious metals.”

“Long term we are very bullish … we see it as being a very nice liquid store of value that will provide good avenues for investment for a long time going forward,” he said.

3. Newmont Mining Rejects Barrick Gold’s Takeover Bid

After creating a wild buzz in the gold sector last week, the board of Newmont Mining has rejected the unsolicited takeover offer from Barrick Gold.

The board made the unanimous decision to refuse the US$18-billion offer as the proposal, “presents significant risks to Newmont shareholders,” and is not in their best interest.

Newmont will instead move ahead with its deal to acquire Goldcorp (TSX:G,NYSE:GG) for US$10 billion, an equally massive deal.

“Our thorough review of Barrick’s unsolicited proposal and its associated risks has reaffirmed our conclusion that the combination of Newmont and Goldcorp represents the best opportunity to create value for Newmont’s shareholders and deliver industry-leading returns for decades to come,” Gary Goldberg, Newmont’s CEO, said in the announcement.

Also in the news

Cornerstone Capital Resources (TSXV:CGP, OTCMKTS:CTNXF) rejected SolGold’s (TSX:SOLG, LSE:SOLG, OTC Pink:SLGGF), unsolicited proposal to acquire Cornerstone on Friday (March 8).

“The Board is unanimous that SolGold’s proposal substantially undervalues Cornerstone, a fact that has clearly been recognized by our shareholders with holders of approximately 59% of the outstanding common shares having now advised Cornerstone that they will not support SolGold’s proposed bid” said Greg Chamandy, chairman of the Cornerstone Board.

For its part, SolGold proposed an all-stock transaction of 0.55 a share for every Cornerstone share held, which it argues is a 20 percent premium to the takeover target’s share price. At current market prices, this will be about C$0.35 a share, or about C$226-million for all the outstanding common shares of Cornerstone.

Also, Detour Gold (TSX:DGC, OTC Pink:DRGDF) reported its FY-18 results on Thursday (March 7) and also announced that its Chairperson, James Gowans has resigned.

Detour reported a drop in adjusted earnings for the year to C$64.2 million, from C$75.1 million in 2017. Additionally, revenue totalled C$776-million on the sale of 610,672 ounces of gold, at an average realized price of C$1,268 per ounce, compared with C$1,256 per ounce in 2017.

Earnings from mine operations for the year totalled C$145.7 million, and net loss for 2018 was C$1 million.

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Securities Disclosure: I, Nicole Rashotte, 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.

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