The precious metals took some hits this week, the US dollar regained momentum and equities became stronger.
Gold found itself tumbling on Thursday (March 28), declining approximately 1.5 percent and slipping below the psychological level of US$1,300 per ounce — its biggest drop in over seven months.
“We may have had some physical buyers coming in the market. The price fall was fairly steep and when prices fall that quickly, [most] buyers tend to stay out of the market,” said Philip Newman, a director at Metals Focus.
The greenback lingered near its highest point in more than two weeks, while stock markets gained momentum on hopes of progress in trade talks between Beijing and Washington.
Gold has been gaining momentum in 2019 thanks to a basket of geopolitical issues that have softened the US dollar and sent investors to seek out the safe haven nature of gold. As some of these issues have diminished, so has some of the yellow metal’s value.
As of 9:43 a.m. EST on Friday, gold was trading at US$1,298.90.
Meanwhile, silver was up marginally on Friday after hitting its lowest since late December at US$14.94 per ounce. As with gold, silver tends to be negatively affected by a rising US dollar.
As of 9:46 a.m. EST, the white metal was trading at US$15.16 per ounce — still remaining below the US$16 threshold.
As for the other precious metals, platinum climbed close to 2 percent for the week, and, as of 10:05 a.m., the metal was up 1.67 percent, trading at US$852 per ounce.
For its part, palladium picked up over 2 percent after falling to two-month lows in the last session.
“It’s just some buyers coming in and thinking that these prices are of fair value and this is the opportunity to come into the market. They might have thought the declines yesterday were overdone and now is a good time to come in and build some positions modestly,” said Newman.
Palladium’s steady rise and record-setting prices stalled this week when the metal slid the most that it has since January 2017 on Thursday, a slide that analysts attributed to a possible drop in demand due to a weaker global economy.
“When you have an exponential price rise, at some point you will come back to fundamentals,” ABN AMRO (AMS:ABN) analyst Georgette Boele said.
As of 10:15 a.m. EST, the metal was trading at US$1,362 per ounce.
Precious metals top news stories
Our top precious metals stories this week include an interview with Dr. Kal Kotecha, editor and founder of the Junior Gold Report, from this year’s Prospectors & Developers Association of Canada (PDAC) convention, a report from the CPM Group on the direction of the price of gold this year and a look at the possibility of mergers and acquisitions (M&A) within the silver space.
At PDAC, Kotecha explained how both the upcoming economic crisis and M&A are good for gold, what his favorite metal is and which direction he sees the price of silver going.
“We are going into a deep economic crisis, maybe starting in about 12 months [and it will] maybe last two or three or four years […] I think this is going to be a little more gradual [than in 2008], with a lot of down days, and I think that is what’s going to be a really good catalyst for gold,” he said.
While the first few months of 2019 have seen gold prices begin to rebound, New-York-based CPM Group released its 2019 Gold Yearbook on Tuesday (March 26), stating that the yellow metal will see a slump in the middle of this year before regaining momentum.
Investor interest in the yellow metal crashed and demand for physical gold spiraled downward in 2018. However, towards the end of Q4, a basket of geopolitical concerns shifted interest back to gold as investors sought it out as a safe haven within a turbulent market.
Despite this, CPM believes that the precious metal will find gains in April before beginning its descent below the psychological level of US$1,300 per ounce.
“We think the price probably gets a little stronger yet in March and April and then comes off into the second quarter and then maybe moves down to US$1,280,” said Managing Partner Jeffrey Christian.
With the trend of M&A that the market has seen from gold companies as of late, INN decided to chat with five industry insiders during this year’s PDAC convention to get their thoughts on the chances of the silver space adopting that same strategy.
When speaking with these industry experts, it was obvious that they fell into two camps — those who were hopeful and could envision the possibility of consolidation within the silver space and those who could not see the plausibility of it, given the white metal’s current prices.
INN spoke with: Randy Smallwood, president and CEO of Wheaton Precious Metals (TSX:WPM,NYSE:WPM); Brian Leni, founder of the Junior Stock Review; Kotecha of the Junior Gold Report; Darren Blasutti, CEO of Americas Silver (TSX:USA,NYSEAMERICAN:USAS); and Alain Corbani, head of commodities at Finance SA.
Also in the news
RNC Minerals (TSX:RNX) released its Q4 2018 results and reported that high gold grades from Australia’s Beta Hunt mine, where the Father’s Day Vein was discovered last year, have boosted the fourth-quarter and year-end performance for the miner.
The Canadian company announced that it achieved production of 73,801 ounces of gold for 2018, compared with 37,027 ounces in 2017. Fourth-quarter output increased by 21 percent year-on-year to 15,341 ounces of gold.
“RNC generated more than US$27 million adjusted earnings before interest, tax, depreciation and amortization in 2018, with US$16 million of that coming in a record fourth quarter. Beta Hunt AISC costs per ounce in the quarter declined to US$698, reflecting increased sales of coarse gold from our Father’s Day Vein discovery. [This shows] the mine’s cash flow potential,” noted Mark Selby, president and CEO.
“Our 40,000 meter exploration program to unlock Beta Hunt’s exploration potential began during the quarter, delivering both multiple high grade gold intersections and thick gold mineralization intersections,” he added.
Finally, Bloomberg reported that Russia is stockpiling gold as Vladimir Putin has set out on a quest to break Russia’s reliance on the US dollar.
Data from the central bank shows that holdings rose by 1 million ounces in February, the most since November. The data also reveals that Russia is rapidly progressing towards its goal to diversify away from American assets. Analysts, who have coined the term de-dollarization, have begun guesstimating what the global economic impacts may be if more countries adopt a similar philosophy and what it could mean for the dollar’s desirability compared with other assets, such as gold or the Chinese yuan.
“Should it reach the limit for domestic purchases, I think the central bank will start to import gold,” said Oleg Kouzmin, chief economist at Renaissance Capital in Moscow and former advisor in the central bank’s Monetary Policy Department.
“Given the geopolitical risks, it’s likely the central bank will keep increasing gold’s share of reserves.”
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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.