-- Published: Monday, 14 November 2016 | Print | Disqus
By Frank Holmes
The best-performing precious metal for the week was palladium, up 7.56 percent. The strength in palladium is seen as an indicator of improving manufacturing and automobile demand, since its primary use is in catalytic converters.
Pollsters weren’t the only ones to get the election outcome wrong, as demonstrated by the uncertainty and volatility in the gold market this week. Hedge funds last week betted that the metal would rally for the second-straight week, and Citigroup Inc. analysts predicted that a Trump victory would push gold to $1,400, while a Clinton victory would send prices down to $1,250. However, as the results were posted early Wednesday, gold had its heaviest-ever trading day, surpassing the volume on June 24, after Britain decided to leave the European Union. Gold surged at the start of the day, and gold dealer Sharps Pixley Ltd. reported running out of bars and coins. As the day closed, gold sold off, ending the day down slightly.
Gold Road Resources has entered into a project acquisition deal with Gold Fields for the Gruyere project. Gold Road has chosen the “best risk-adjusted path to finance Gruyere for its shareholders,” writes RBC Capital Markets.
The worst-performing precious metal for the week was silver, down 6.05 percent, with gold following closely behind, down 6.00 percent.
The World Gold Council (WGC) reported that Middle East gold jewelry demand plunged 24 percent in the third quarter. The WGC cited high gold prices and low crude prices as the chief causes for the decline. The WGC also stated that the high gold prices and the Indian government’s push for more disclosure will cut the country’s demand to the lowest level in seven years in 2016. The negative news went on as the WGC stated that jewelry demand dropped 21 percent in the third quarter, and central banks bought almost half as much gold as a year earlier.
Goldman Sachs analysts joined the chorus of predictions that Hillary Clinton would win the election, and based their forecast of gold at $1,280 over the next three to six months based on this view. But Bloomberg noted that the surprising Trump victory was not “enough to convince skeptics that the gold rally can be sustained,” as gold closed down for the day on Wednesday.
“The state of the world is one of constant flux and uncertainty,” said Cobus Loots, CEO of Pan African Resources Plc, as he noted why investors need gold. Randy Smallwood, CEO of Silver Wheaton Corp, echoed this sentiment, as investors see gold as a store of value and will likely continue to use the metal as a hedge against global uncertainty and a potentially weaker dollar.
BlackRock sees higher expectations for inflation of 1.75 percent, the highest level since the summer of 2015, based on the 10-year Treasury Inflation Protected Securities market. Even though interest rates may rise, the higher inflation level can be supportive of gold.
Klondex Mines Ltd. announced a new discovery at the Fire Creek Mine. Brian Morris, the vice president of exploration, stated the underground drill results “demonstrate the robust, high-grade nature of the vein system.” Positive drill results would mean resource growth for the company.
The Indian government made a surprise announcement to abolish 500- and 1,000-rupee notes as part of an effort to discourage black-money trade. The decision resulted in a sudden rush of gold buying, and shops stayed open until 11:00 at night to accommodate buyers. However, this initial rush is seen as temporary, and the lack of large cash notes could lower gold demand, according to India’s Bullion and Jewellers Association.
Hedge fund manager Stanley Druckenmiller told CNBC that he sold all of his gold, saying that “All the reasons I owned it for the last couple of years seen to be ending.” Druckenmiller stated that he now has a “large bet on economic growth.”
For gold miners, the push to cut costs has seen capital expenditure levels take a hit. Global Mining Research notes that some of the cuts may be attributable to lower prices and more efficiencies. However, for those companies that have been too aggressive in cutting costs, this could be a threat to their delivery and production.
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