Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The gold price consolidated recent gains on Tuesday, buoyed by safe haven buying following a deepening crisis in Iraq and rotation out of riskier assets like equities which pulled back sharply on the day.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery in after hours trade exchanged hands for $1,319.10 an ounce, up slightly from Monday’s trading session but off its highs for the day of $1,326.
Tuesday’s trading was quiet again with only some 115,000 contracts changing hands. This compared to Thursday last week when after months of subdued trade on gold futures markets volumes surged and gold jumped nearly $50.
Last weeks rally was ascribed to dovish comments comments by Federal Reserve chair Janet Yellen that US interest rates would be lower for longer and the escalating situation in Iraq.
Those two factors are very much still in play but gold’s recent price performance has not convinced most market analysts that a rerating is in order.
Prices will average $1,250 an ounce in the third quarter a decline of more than 5% from current level, according to the median of 15 estimates by Bloomberg.
The analysts were surveyed before and after the US central bank’s June 18 outlook, but predictions were not altered:
“The surge in gold can’t sustain itself,” Donald Selkin, who helps manage about $3 billion of assets as chief market strategist at National Securities Corp. in New York, said June 20. “It was a temporary spike because of a confluence of events: Iraq and Yellen. People will be looking at other areas for excitement. Holdings are down, so people are leaving gold in search of something better.”
A new note by Barclays concurs with these sentiments adding that “any price level above $1,300 per ounce must be viewed as opportunity to sell gold,” reports Hard Assets because of expectations of stronger US economic numbers and employment:
“Any upside for jobs growth would imply further downside for gold. Moreover, analysts predict a broad-based US dollar rally in the near term, which again would weaken the gold’s prospects.”
Gold is up 10% so far this year after 2013’s dismal 28% drop, the worst performance in more than three decades for the metal.
Image of bear skin rugs on sale at Ismaylovo market, Moscow, March 2007 by beggs
3 Comments
Pooter
Using that photo of the bear skins goes a LONG way to proving that industry does not care about the environment it destroys. The grizzly bear corridor in Western Canada is suffering brutal loses due to human encroachment (parks, roads, mines, rail). Mr Els, you seriously COULD NOT find another representative picture for your article?!?! Shame on you.
MINING.com Editors
@NardaB Or you could see it as an opportunity to highlight your cause (which you just did) and do so in a forum where your message would reach participants in one of the industries you blame for the suffering and brutality experienced by bears. Also, as per the credits the picture was taken in Moscow, Russia.
–Frik
ChiSpy
The real bears in the picture illustrate the outcome for the gold bears once gold finally bottoms.