Gold's Silver Lining

Gold is "becoming mainstream" amid a record run that is only starting and has reawakened exploration, particularly in Canada where optimism will flow into global mining markets, according to industry experts at the first Virtual Gold conference.

Buoyant stock, property and bond markets show "everyone has been spoiled by central banks printing more money, thinking they're saving the system," Switzerland-based Matterhorn Asset Management founder and managing partner Egon von Greyerz told the Aug. 20 conference hosted in Sydney.

A U.K.-based human rights watchdog is calling on The London Bullion Market Association to suspend the certification of a gold refiner used by some of the largest companies in the world, saying the refiner failed to adequately investigate allegations of human rights abuses at one of its source mines.

Gold is "becoming mainstream" amid a record run that is only starting and has reawakened exploration, particularly in Canada where optimism will flow into global mining markets, according to industry experts at the first Virtual Gold conference.

Buoyant stock, property and bond markets show "everyone has been spoiled by central banks printing more money, thinking they're saving the system," Switzerland-based Matterhorn Asset Management founder and managing partner Egon von Greyerz told the Aug. 20 conference hosted in Sydney.

"Nobody sees the big bad wolf in disguise," von Greyerz said, referring to global debt. Von Greyerz estimated that global debt will soar from close to US$280 trillion now to US$2 quadrillion by 2025, warning that the global financial system could collapse as a result, and said the 2007-2008 global financial crisis was "just a rehearsal."

S&P Global Ratings again raised its near-term price assumptions for gold and made minor adjustments to other base metals such as copper, iron ore, zinc, and aluminum. We also cut our base-case price assumptions for coal.

With the Western World still in different stages of lockdowns, and the Eastern World emerging from theirs but still far from resuming full-blown industrial production, most metal prices are struggling to recover to pre-COVID-19 levels.

The gold price is taking a breather, with eyes on what it will take to propel the metal higher as investors move money into riskier asset classes, sources said June 4.

Gold had been on a stellar run higher throughout 2020, bolstered by the coronavirus pandemic and associated panic as allocations moved into safe-havens. However, since countries have started to ease lockdown measures, and some form of new normality has emerged, traders have been parking their money elsewhere.

Still, the move is leaving some scratching their heads, as central governments pile on debt in the form of a tsunami of fiscal stimulus.

Barrick has restarted its shipment of gold concentrate from Tanzania, having paid the first tranche of the $300-million settlement it agreed with the Tanzanian government to resolve the disputes it inherited from Acacia Mining, the company said May 25th.

"In terms of its framework agreement with the government, the shipping of some 1,600 containers of concentrate stockpiled from Bulyanhulu and Buzwagi resumed in April and the first $100 million received from the sale has gone to the government," the company said in a statement.

Barrick – the world's second largest miner – said all material issues had been dealt with or were being finalized, adding that the initial payment will be followed by five annual payments of $40 million each.

The gold spot price broke above $2,000/oz late Aug. 4 and hit an all-time high of $2,044/oz around 1100 GMT of Aug. 5, analysts said.

"Huge session for the precious on Tuesday [Aug. 4] as gold breaks the psychological $2000 barrier for the first time. The action kicked off in early NY trading, the prospect of further US stimulus is putting pressure on the greenback and treasury yields which provided the catalyst for the rise," analysts at precious metal refiner MKS PAMP said Aug. 5. "Once the recent resistance around $1980 was broken the metal took off, we saw a mixture of macro buyers and real money in conjunction with short covering around $2000."

The LBMA said this is the first time in its 100+ year history that the London price of gold has exceeded $2,000/oz.

Much has been made of the relative performance of gold since the start of the global COVID-19 pandemic. The S&P GSCI Gold gained 10.2% YTD through April 7, 2020, highlighting its safe-haven status; however, it is worth reviewing this performance and considering what demand drivers may influence gold prices over the coming months.

The gold spot price dropped nearly 6% day on day, its fifth sharpest one-day drop over the past two decades and its largest daily fall since the sell-off in 2013, analysts said Aug. 12.

Analysts at precious metal refiner MKS PAMP said gold traded to a high of $1926/oz in early Asian hours before falling $50 to $1872/oz, with gold rebounding toward $1900/oz and then falling again to $1862/oz.

"The $115/oz (5.7%) drop is the worst in over seven years," Canaccord Genuity analysts said in a research note.

"We view today's [Aug. 12] sell-off as a price correction given the strong upward price pressure in gold over the past few months, and more acutely over the past few weeks, rather than the start of a more bearish outlook for gold."

Canadian miner Barrick Gold's preliminary second-quarter gold production fell 15% year on year to 1.149 million oz, with total cash costs up 10% at $716/oz and all-in sustaining cost up 19% at $1,031/oz, the company said Aug. 10.

Barrick -- the world's second-largest gold miner gold – said output the half of 2020 was 2.4 million oz, at the midpoint of the company's 4.6 million-5.0 million oz guidance range for the year. Full-year 2020 guidance for total cash costs is forecast at $650-$700/oz sold and all-in sustaining cost forecast $920-$970/oz sold, it said.

The company said the output was a result of strong operating performances, "particularly from Nevada Gold Mines (NGM) in the United States, Loulo-Gounkoto in Mali and Kibali in the Democratic Republic of Congo."

The world is entering a period of deep geopolitical uncertainty, but that could be good for gold prices, industry observers said in presentations to the World Gold Forum. Presenters and attendees logged on to the virtual conference starting April 20 to discuss the gold industry and the COVID-19 outbreak that has roiled global markets and drove the event online. While gold has largely proved its ability to store value through the turbulent market conditions created by the coronavirus, there remain a lot of unknown risks to the sector.