Precious Metals

Precious Metals Investing

Precious metals were up for the week as investors reacted to a halt in interest rate hikes for 2019 and concerns surrounding “the wall.”

The gold price rose on Friday (January 11) as the US dollar slipped on the back of expectations that halts could soon be placed on US interest rates.

The greenback fell against other major currencies when US Federal Reserve Chair Jerome Powell commented that the central bank could be patient on rate policy. With the US dollar down, the yellow metal is now set for its fourth weekly increase.

“Gold rose on a somewhat weaker dollar, but at the moment it seems to be trying to overcome the US$1,300 hurdle,” said Commerzbank (ETR:CBK) analyst Daniel Briesemann.

Investors are also turning to precious metals as market nervousness grows surrounding US President Donald Trump’s persistent demand for a wall to be built on the border with Mexico.

On Thursday (January 10), Trump threatened that he would enlist emergency powers to bypass Congress in order to pay for the proposed wall.

“If more speculators jump on the bandwagon [because of the US government shutdown], gold will pass the US$1,300 level,” Briesemann noted.

“Volatile equity markets and a stalemate over the US government shutdown should keep [gold] well supported. In fact, investors continue to pour money into the gold ETF market,” ANZ (ASX:ANZ) analysts added. As of 9:32 a.m. EST on Friday, the yellow metal was trading at US$1,287.30 per ounce.

Meanwhile, silvermade gains for the week as it was also supported by comments surrounding a pause in interest rate hikes and the government shutdown. The white metal generally moves in unison with gold as it is also seen as a safe haven for investors during times of geopolitical and market uncertainty.

As of 9:34 a.m. EST on Friday, silver was up 0.13 percent, sitting at US$15.56 per ounce.

As for the other precious metals, platinum was down slightly, dipping 0.24 percent as of 9:40 a.m. EST, and trading at US$816 per ounce.

For its part, palladium hit another record this week when it peaked at an all-time high of US$1,344.41 per ounce on Wednesday (January 9). This was the metal’s second time topping gold in the last two months. The first rally took place in mid-December over concerns surrounding a shortage in supply — a worry that continues for investors today.

As of 9:53 a.m. EST on Friday, palladium was down slightly but still trading at US$1,309, making it the highest-trading precious metal.

Precious metals top news stories

Our top precious metals stories this week cover China adding to its gold reserves for the first time in two years, Ascot Resources (TSXV:AOT) announcing that it will acquire IDM Mining (TSXV:IDM) through a definitive arrangement agreement and Maya Gold & Silver (TSX:MYA) achieving commercial production at its Zgounder silver mine.

1. China Adds to Gold Reserves After Two-year Hiatus

China added to its gold reserves for the first time in over two years, with the People’s Bank of China increasing its holdings to 59.56 million ounces as of the end of December 2018.

That’s up from the previous 59.24 million ounces, an amount that was unchanged since approximately 130,000 ounces were added in October 2016. The increase came during a month that was marked by growing concerns about the impact China’s trade dispute with the US could have on economic growth.

“It’s a bullish sign for gold,” Matthew Turner, a commodities strategist at Macquarie Group (ASX:MQG), told Bloomberg on Monday (January 7).

2. Ascot Resources to Acquire IDM Mining in Golden Triangle Deal

Ascot Resources will acquire IDM Mining through a definitive arrangement agreement, with the goal of creating a leading gold development and exploration company, the miners announced in a joint statement on Monday.  

Under the deal, Ascot will acquire all of the issued and outstanding common shares of IDM, with each IDM shareholder being entitled to receive 0.0675 of a common share of Ascot for each share of IDM held.

“The combination of Ascot and IDM creates a very attractive opportunity in northwest British Columbia’s Golden Triangle for our shareholders and stakeholders,” said Derek White, president and CEO of Ascot.

3. Maya Reaches Commercial Production at Zgounder Silver Mine

Maya Gold & Silver achieved commercial production at its Zgounder silver mine, the company announced on Wednesday.

The miner reported that the commissioning and testing phase of its 500-tonne-per-day flotation mill has been completed, and that commercial production was established with the installation of a three-fold effect milling capacity and output.

“Achieving commercial production at Zgounder, Maya’s flagship project[,] marks another major milestone as we continue to deliver growth and value for shareholders,” said Founder, President and CEO Nourreddine Mokaddem in a release.

Also in the news

Also making news this week was Endeavour Mining (TSX:EDV), which increased its ownership stake in the Ity mine from 80 percent to 85 percent.

In order to obtain the additional 5-percent interest in the Ity mine, Endeavour granted DYD International more than 1 million common shares amounting to a total consideration of about C$15 million based on the signing reference share price of C$18.50.

With this new transaction, Endeavour owns 85 percent of the Ity mine, the government of Côte d’Ivoire holds 10 percent and state-owned mining company Sodemi owns the remaining 5 percent.

The transaction was signed on December 21 and closed on Thursday (January 10) evening.

Additionally, Newmont Mining (NYSE:NEM) is making news for announcing that it will cut 120 jobs at its Carlin gold-mining operations in Nevada.

The decision was made after the producer chose to reduce the lifespan of one mine and suspended part of another due to a wall slide, Newmont spokesperson Omar Jabara said on Thursday.

The gold miner also cut overall production guidance for its North American operations for 2018, citing a 12-percent drop in gold production at Carlin during Q3 2018.

“The company doesn’t anticipate any further layoffs at Carlin,” Jabara said.

Finally, Endeavour Silver (TSX:EDR,NYSE:EXK) announced its 2018 fiscal year results on Thursday, revealing consolidated silver production of 5.5 million ounces and gold production of 52,967 ounces.

“All in all, 2018 was quite a transition year for Endeavour Silver. We saw improved performance from El Cubo, but declining performance at Bolañitos, where new mineralized zones were discovered and at Guanaceví, where two new orebodies are being developed,” said CEO Bradford Cook.

Endeavour owns and operates three silver mines in Mexico: Guanacevi, El Cubo and Bolañitos. The miner is also commissioning a fourth mine, El Compas.

The company reported a 7-percent overall improvement in production for last year compared with 2017 thanks to a higher mine output, silver and gold grades and recoveries at the El Cubo mine.

Despite this, output was lower than guidance due to lower mine output and silver grades at Guanacevi, lower gold grades at Bolañitos and delays in obtaining commercial production at El Compas.

On the sell side, Endeavour sold 5.4 million ounces of silver and 51,318 ounces of gold in 2018.

Don’t forget to follow us @INN_Resource for real-time news updates!

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


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