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Top Stories This Week: Gold Price Dips Below US$2,000, Newmont to Acquire Newcrest
May. 19, 2023 12:00PM PST
The gold price slipped below the US$2,000 mark this week, falling as low as US$1,955. Meanwhile, Newmont announced plans to acquire Newcrest Mining in a US$19.5 billion transaction.
The gold price remains near historic highs, but it did see downward pressure this week, dropping to the US$1,955 per ounce level midway through the period. It was just below US$1,980 at the time of this writing on Friday (May 19)
Debt ceiling discussions are reportedly weighing on gold, with Democrats and Republicans making slow progress in negotiations. The country may default if the debt ceiling isn't raised by June 1, but Congress has never before let that happen.
How low could gold go? While the broad consensus is that the yellow metal is set to rise much higher in 2023 and beyond, some market watchers believe it could pull back before it makes that big move. In a recent interview, Chris Vermeulen of TheTechnicalTraders.com laid out two possible scenarios for the gold price.
He first pointed to US$2,090 as a "breakout zone" for gold, saying that if it can pierce or hold above that level, especially on a monthly basis, then the next stop could be US$2,600 to US$2,700.
However, that big move isn't guaranteed to happen — it's also possible that the precious metal could fall as low as US$1,800. Vermeulen pointed out that gold's recent price action has been driven by news events, including the banking crisis and expectations that the US Federal Reserve may stop hiking interest rates. If the US goes into a recession and stocks collapse like they did during the tech bubble and 2008 financial crisis, gold is likely to take a hit.
"While I'm very bullish on gold and I own a lot of physical metal for the long-term picture, we could still see gold pull back and continue in this kind of sideways channel over the next year," he explained. In his view, it's possible the precious metal could sink all the way down to US$1,650, but US$1,800 is likely the lowest it will go.
Newmont to take over Newcrest in US$19.5 billion deal
M&A was once again in focus in the gold sector this past week, with major miner Newmont (TSX:NGT,NYSE:NEM) entering into a US$19.5 billion deal to acquire Newcrest Mining (TSX:NCM,ASX:NCM,OTC Pink:NCMGF).
If this news sounds familiar, it's probably because Newmont first approached Newcrest back in February. The company then submitted a revised non-binding indicative proposal in April and entered confirmatory due diligence.
Although the transaction faced skepticism when it was announced, with executives at Agnico Eagles Mines (TSX:AEM,NYSE:AEM) and Barrick Gold (TSX:ABX,NYSE:GOLD) raising questions, Newmont's Tom Palmer has emphasized its benefits, highlighting an estimated $500 million in annual synergies. He's also noted that Newmont will increase its exposure to copper, which is gaining traction for its role in the energy transition.
"The combination of Newmont and Newcrest represents an exceptional value proposition for shareholders and other stakeholders. It creates an industry-leading portfolio with a multi-decade gold and copper production profile in the world’s most favorable mining jurisdictions" — Tom Palmer, Newmont
The acquisition remains subject to approval from both Newmont and Newcrest shareholders, with completion anticipated in the fourth quarter of this year.
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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.
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