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Mining industry legends discuss the backstories on their multibillion-dollar successes.
Gold advanced to a seven-week high on Thursday as the Donald Trump-inspired rally in equities begin to lose steam and the US dollar comes under renewed pressure.
Gold for delivery in February, the most active contract on the Comex market, hit a high of $1,207.20 an ounce in overnight trade, up nearly 1% from Wednesday’s close and the highest on an intra-day basis since November 23. The metal paired those gains in afternoon trading in another day of huge volumes in New York dipping below the psychologically important $1,200 an ounce level.
Gold is now up nearly 5% year to date, while the Dow Jones blue chip index has managed less than half a percentage point gain in 2017
Gold is up more than $80 an ounce since hitting post-US election lows mid-December, but remains down some $130 from an initial but brief surge on election night as results showed a likely victory for Trump.
Gold bears have been making big bets that a Trump administration will lead to strong US economic expansion, higher interest rates and a stronger dollar. Higher interest rates boosts the value of the dollar and makes gold less attractive as an investment because the metal is not yield-producing and investors have to rely on price appreciation for returns.
But rising uncertainty about the impact of the president-elect’s fiscal stimulus plans has seen the dollar take a beating this week and US stock markets retreat from their highs.
Gold is now up nearly 5% year to date, while the Dow Jones blue chip index has managed less than half a percentage point gain in 2017 and the S&P 500 index hasn’t fared much better. The Nasdaq has been setting records this year, but gold has also outperformed the tech-laden index.
Gold has a habit of starting off well in a new year with a recent note from ABN Amro showing that since 2000 gold prices rose in January nearly two-thirds of the time. Moreover, the positive starts to the year happened regardless of whether the year before had ended on a positive or a negative note.
Source: ABN Amro
The Dutch bank does not believe gold’s momentum in the new year will hold however:
The gold market is now more focussed on inflation. Higher-than-expected US inflation numbers will probably support gold prices. However, if US data (excluding inflation data) continue to come in strongly as we expect, this positive short-term momentum is likely to fade.
Reaction by investors to gold’s potentially fourth day in a row of gains was subdued with top gold mining stocks making relatively modest gains on Thursday.
Shares of top gold miners Toronto’s Barrick Gold and Denver-based Newmont Mining enjoyed 2% and 1% gains on the day. Vancouver’s Goldcorp advanced 1.4%, while further down the rankings trading was mixed with Canada’s Iamgold advancing 1.8% and Novagold adding 1.4% while Yamana Gold and Eldorado Gold trended weaker.
ADRs of world number three gold mining company in terms of output Anglogold Ashanti jumped 5.4% while fellow South Africa-based miner Sibanye Gold added 2,8% – the volatile counters are also the top performers year to date with over 14% gains.
Comments
JH
Higher interest rates boosts the value of the dollar and makes gold less
attractive as an investment because the metal is not yield-producing
and investors have to rely on price appreciation for returns.
Worth pointing out that gold rises when the inflation rate minus interest rate is positive, then gold rises. Simplistic and wrong to keep writing that interest rates alone change gold price.