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SWOT Analysis: Gold In Focus After Climbing Above Key Threshold Level


 -- Published: Monday, 16 October 2017 | Print  | Disqus 

By Frank Holmes

Strengths

  • The best performing precious metal for the week was palladium, up 7.28 percent as money managers raised their net-long positions on continued expectations that the shift from diesel to gasoline powered cars will continue.  
  • Gold traders and analysts surveyed by Bloomberg are bullish for the first time in five weeks, reports Bloomberg. Following the release of the Fed minutes which showed rising concern about low inflation, the yellow metal climbed to a two-week high.  A fresh flare-up in tensions with North Korea pushed gold higher this week, writes Bloomberg, along with a U.S.-Turkey diplomatic spat regarding visitor visas was supportive.
  • The Indian government withdrew an order that brought the gold industry under anti money-laundering legislation, reports Bloomberg. Jewelers were included in the Prevention of Money-Laundering Act in August that increased compliance requirements. In response to the rule reversal, shares of jewelers climbed in the country. This move comes just as gold buying improves before the Hindu festival of Diwali, the peak season for demand, the article continues.

Weaknesses

  • The worst performing precious metal for the week surprisingly was gold, up more than 2 percent, despite grabbing most of the precious metals headlines.
  • According to the People’s Bank of China website, gold reserves in China came in at 59.24m fine troy ounces in September, unchanged again from the previous month, which unfortunately is beginning to become a trend.  Chinese markets had been closed the prior week to mark National Day.
  • Oddly, the B2Gold share price underperformed for the week as it reported a production beat for the third quarter as well as its first gold pour at Fekola.  SSR Mining also reported a minor shortfall in quarterly production which did hit the share price as well.

Opportunities

  • The odds of an interest rate increase by year-end fell to 73 percent on Friday, from 77 percent on Thursday, weakening the dollar, according to fed funds futures data compiled by Bloomberg. Gold climbed above $1,300 on the dovish news and this has heads turning somewhat back to gold versus the bulk miners as the following report illustrates. S&P Global Market Intelligence released a note this week showing that miners planned to spend nearly $8 billion looking for new deposits in 2017, about 14 percent more than last year, reports Bloomberg. Gold exploration budgets in particular rose 22 percent to $4.1 billion in 2017, the article continues. That’s the biggest increase among nonferrous metals.

http://www.goldseek.com/news/2017/10-16fh.png

  • Another report this week comes from UBS, saying that gold is poised for a recovery. “Following the past three Fed rate hikes, gold typically performed well in the months that followed, while the dollar, rates and equities tended to come off. Gold has rallied each January since 2014 and we think there is reasonable potential for this trend to continue,” the report reads.
  • Miners could be spared a proposed royalty increase in Western Australia, reports Bloomberg, after the government’s opposition party said it would block the motion in parliament. Western Australia hosts four of the nation’s biggest gold mines. Leader of the opposition Liberal party Mike Nahan said on Tuesday that Liberal party members of parliament will vote with other minor and cross-benchers to overturn the royalty increase.

Threats

  • Despite gold surpassing $1,300 this week, Goldman Sachs sees further technical weakness for the yellow metal, with the potential for prices to fall 14 percent from current levels, reports Bloomberg. The bank has been fairly bearish on gold, maintaining its outlook in a September report that gold prices will end the year at $1,250 an ounce.
  • Foreign Relations Committee Chairman Bob Corker and President Donald Trump ratcheted up a feud this week over Twitter.  Corker called the White House an “adult day care center” and warned that Trump could set the U.S. “on the path to World War III,” reports Bloomberg.
  • Following reports that Secretary of State Rex Tillerson called President Donald Trump a moron, the president fired back defending his intelligence, reports Bloomberg. “I think it’s fake news, but if he did that, I guess we’ll have to compare IQ tests,” Trump said in a Forbes interview. “And I can tell you who is going to win.”

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 -- Published: Monday, 16 October 2017 | E-Mail  | Print  | Source: GoldSeek.com

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