Gold SWOT: Gold gave up on gains as treasury yields rose

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Strengths

  • The top performing precious metal of the week was platinum, up 4.52%. This has more to do with speculation and, perhaps, with the minting of the $ 1,000 billion coin. According to Raymond James, Wheaton Precious Metals Investor Day shed light on the company’s portfolio of assets. It has a diversified asset base (24 operating sites) with more than 70% of the company’s output coming from assets that are in the lowest cost quartile. The portfolio has a lifespan of over 30 years based solely on reserves. The company has no debt and has a dividend linked to operating cash flows, with 30% of the average operating cash flow for the four previous quarters being distributed to shareholders.
  • Uranium spot prices are skyrocketing higher with no sign of slowing down. The spot price hit $ 50 per pound, an increase of 64.5% from $ 30.4 per pound on Aug. 13, according to S&P Global Platts. Most uranium analysts point to a wave of buying in the spot market by Sprott Asset Management LP, which launched a uranium trust in July to salvage material and give investors exposure to the price of l physical uranium. “We have a uranium market driven entirely by one financial player,” said Matt Zabloski, managing director of Delbrook Capital Advisors, which intends to sell uranium. “…
  • Gold shipments from Europe’s main refining center reached 116.4 tonnes last month from 94.1 tonnes in July, according to data published on the website of the Swiss Federal Customs Administration. Sales to India soared 93% to 70.3 tonnes and shipments to China fell 9% to 18.2 tonnes.

Weaknesses

  • The worst performing precious metal for the week was palladium, down 2.18% on new prospects of delays in new car production with the continuing shortage of chips. Exchange-traded funds continued to sell, bringing this year’s net sales to 7.18 million ounces, according to data compiled by Bloomberg. Sales were equivalent to $ 19.2 million. Total gold held by ETFs fell 6.7% this year to 99.9 million ounces.
  • Spot palladium hit a 52-week low at $ 1,931.48 an ounce, down 4.2% from the previous close. The previous low was September 14. Spot prices are down 21% since the start of the year. This is due to the slowdown in automotive demand, which is reducing the demand for catalytic converters using palladium.
  • Gold gave up on its initial gains as Treasury yields rose after the Federal Reserve signaled it may soon start cutting back on asset purchases. The yield on 10-year treasury bills rose six basis points, reducing the attractiveness of the bullion because it offers no interest. Gold also fell as the rise in US stocks reduced demand for the metal as a safe haven, with analysts saying the Fed’s outlook points to a strong economy. Gold has fallen more than 7% this year as the global economic recovery has raised the possibility that central banks will tighten their stimulus measures. Traders are balancing this view with economic concerns about the resurgence of the pandemic and the possible fallout from the China Evergrande group debt crisis, providing some support for gold.

Opportunities

  • Red Pine Exploration has stated that exploration drilling at its Wawa gold project in Ontario has revealed high grade gold mineralization. The company said its best drilling results in the Jubilee shear zone on the property included 25.73 grams per tonne of gold over 4.78 meters of core and 8.76 grams per tonne of gold over 0.87 metre.
  • With regard to platinum, one way to approach the US debt ceiling would be the nuclear option. The steps Bloomberg describes would be as follows: 1) The US Treasury strikes a platinum coin with a face value of $ 1,000 billion, for example. 2) The US Treasury then deposits this coin into its account at the Federal Reserve. 3) With the Fed account now credited up to $ 1,000 billion, the Treasury would then buy back US Treasury bonds to prevent the debt ceiling from being exceeded. 4) It would be the equivalent of quantitative easing, with the Treasury in the role of facilitator – essentially by swapping reserve balances, which are not counted in the debt ceiling, for US Treasury bonds , which are. A Freedom of Information Act request showed that the Obama administration investigated this option but did not follow through with the plan.
  • Asante Gold announced a strategic investment of $ 5 million in Roscan Gold last week. Asante’s management team last sold its previous gold discovery in Ghana, Cardinal Resources, to Shandong Gold and is now returning the Bibiani mine to production. Roscan has a very strategic board chaired by Sir Samuel Esson Jonah and its CEO is Nana Sangmuah, of Ghanaian descent. Roscan has a strategic land position in a prolific gold camp in southwestern Mali and has delivered impressive grades and interceptions.

Threats

  • South African courts recently overturned mining regulations that govern black ownership targets for companies. In 2018, it was decided that the 26% holding target should remain in perpetuity. If the government decides to appeal the decision, it would reintroduce uncertainty for investors when status is a big plus.
  • Sibanye Stillwater expects South African rhodium production to decline 9% to 690,000 ounces by 2030, the company said in a presentation on its website. Sibanye says platinum production from South Africa, the world’s largest producer, could drop to 5.7 million ounces in 2030 from 6 million ounces in 2019.
  • South African mining companies plan to spend up to 40 billion rand ($ 2.7 billion) to build 2,000 megawatts of power generation capacity, said Roger Baxter, chief executive of the Minerals Council South Africa. Mining companies have been pushing to develop their own power plants amid persistent power cuts imposed by state-owned utility Eskom Holdings SOC Ltd. more attention to climate change issues.

Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.


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