Gold mid-tiers’ Q3 2024 fundamentals
All-time-high gold prices combined with relatively-contained costs catapulted unit earnings to another epic record.
Disappointing jobs and manufacturing data out of the US coupled with a sagging dollar sent the gold price on a tear Wednesday with the metal surging past the psychologically important $1,200 an ounce level and back into positive territory for the year.
A new report by Metals Focus – Gold Focus 2015 – forecasts a bottom in the price of gold this year with a rising trend in 2016 after three years of declines.
Short term the London-based research firm expects further price weakness in the coming months and a low for the year at $1,080 which would constitute a more than 5-year low. Metals Focus’ estimated annual average of $1,190 would mark a 6% decline compared to last year.
“The biggest headwind continues to be expectations of US interest rate increases later this year, as other developed economies’ ultra-loose monetary policies (notably the Eurozone’s) remain in place, this helping to drive
up the dollar against other currencies. Low inflation, weak commodity prices and strong equities are other factors that should keep gold under pressure,” says Metals Focus in its 88-page review.
The firm also believes that the actual start of US interest rate increases will – paradoxically – temper the pressure that expectations of a rise had placed on the price and mark the turning pointing.
Shortly after the first Fed action in six years gold will start appreciating according to the report which is “premised on our expectation that these increases will be slow and modest, leaving real rates in negative territory for some time to come.”
From 2016 onwards, there are several plausible arguments to be made to provide the spark for a renewed gold bull market according to the report:
While Western investor interest in gold remains low, selling pressure is likely to ease further from the already much-reduced level of liquidations seen in 2014.
Meanwhile, Asian investment demand for physical gold is expected to recover from last year’s slump. In addition potentially gold-friendly developments in debt, inflation, foreign exchange, commodity and equity markets and the scope for a far more malign environment for international relations should also boost the price.
3 Comments
rayban
If we expect to actually see a sudden start and obvious upward shift in miners ….. we should pay close attention . Bull markets are various and the start can be hard to detect or volatile . The best ideas may start upward the soonest followed by the next best and so onward . I am guessing a little , I have only seen 1 bull market before the up and coming next one .
The various central banks and what they might do , seems caution is the word for a while yet . Never place all of ones eggs in the same basket , yet keep some out of baskets .
chris baus
Call me naive but I simply bet on a few facts:
– the US wages rise will soon begin – people have more money, small fraction will go to gold (jewellery, fittings, Apple watch etc). If the wages won’t rise then QE4 should start as economy would falter otherwise.
– The EU starts showing some promising signs – PMI is above 50, yields on most risky (Spanish and Greek) bonds are down, consumer sentiments are rising, countries which performed well during the GFC show much improved activity with youth unemployment down (Poland). Again some of the money will trickle into gold.
– China is growing at 7% (forecast for 2015 – corresponds to about 10% 5 years ago). Current small slow down (stocks are booming) is due to war on corruption and pollution. This effect should start moderating this year. With US and EU coming on line China will pick up also and some of this will trickle into gold.
– The Asian Investment Bank coming on line will offset speculative effects in Asian region (caused by the easy money from US Fed, UK CB, Japanise CB and now ECB) which should make more pronounced the underlying trend which is the Asian view of gold. Some hedge funds realising that too.
Simply, the money will start moving faster and some of the magnifying effect will be in gold also. Add Asia’s awareness of gold as long term hedge against loosing wealth, gold price should be rising.
confused
Bo polny is an idiot!