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Markets in Motion

The Essential Podcast, Episode 15: Safe Haven — Gold Shines Through the Crisis

featuring Fiona Boal, Global Head of Commodities & Real Assets at S&P Dow Jones Indices

Strength in Gold

Gold Going 'Mainstream,' Reawakening Canadian Explorers Amid Broader Optimism

Gold is "becoming mainstream" amid a record run that is only starting and has reawakened exploration, particularly in Canada where optimism will flow into global mining markets, according to industry experts at the first Virtual Gold conference.

Buoyant stock, property and bond markets show "everyone has been spoiled by central banks printing more money, thinking they're saving the system," Switzerland-based Matterhorn Asset Management founder and managing partner Egon von Greyerz told the Aug. 20 conference hosted in Sydney.

Russia Jan-May Gold Output Up 3%, Supported by Record Prices, Stronger Mining

Russian gold output over the first five months of the year increased year on year as the price of the yellow metal rose continuously and mining ramped up, offsetting a decline in volumes generated through recycling.

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Gold Miners' Q2'20 Defined by COVID-19, Strong Prices and M&A Activity

A few themes have emerged as June winds down and gold miners prepare to release second-quarter earnings results, including mergers and acquisitions by Chinese companies, strong gold prices, and the impact of COVID-19 on operations.

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Human Rights Group Calls for Major Gold Refiner to Lose 'Good Delivery' Status

A U.K.-based human rights watchdog is calling on The London Bullion Market Association to suspend the certification of a gold refiner used by some of the largest companies in the world, saying the refiner failed to adequately investigate allegations of human rights abuses at one of its source mines.

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Gold's Future

Gold Going ‘Mainstream,' Reawakening Canadian Explorers Amid Broader Optimism

Gold is "becoming mainstream" amid a record run that is only starting and has reawakened exploration, particularly in Canada where optimism will flow into global mining markets, according to industry experts at the first Virtual Gold conference.

Buoyant stock, property and bond markets show "everyone has been spoiled by central banks printing more money, thinking they're saving the system," Switzerland-based Matterhorn Asset Management founder and managing partner Egon von Greyerz told the Aug. 20 conference hosted in Sydney.

"Nobody sees the big bad wolf in disguise," von Greyerz said, referring to global debt. Von Greyerz estimated that global debt will soar from close to US$280 trillion now to US$2 quadrillion by 2025, warning that the global financial system could collapse as a result, and said the 2007-2008 global financial crisis was "just a rehearsal."

H1 Global Gold ETFs Smash Records, Inflows Hit $39.5 bil: World Gold Council

Gold flows into Exchange Traded Funds have had a record year-to-date so far, with first half global net inflows touching $39.5 billion, crushing the previous full year record of $23 billion in 2016, industry lobby group World Gold Council said July 7.

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Gold Stream on Ivanhoe's Platreef Might Sell for Up to US$900M, Analysts Say

Analysts highlighted the potential for Ivanhoe Mines Ltd. to raise about US$500 million to US$900 million through a gold streaming deal to fund ongoing development of its 64%-owned, polymetallic Platreef project in South Africa, after the company outlined plans to speed up its path to production and touted increasing interest from possible financiers.

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Gold vs Other Metals

Metal Price Assumptions: Gold Shines, While Slow Recovery Flattens Other Metal Prices

S&P Global Ratings again raised its near-term price assumptions for gold and made minor adjustments to other base metals such as copper, iron ore, zinc, and aluminum. We also cut our base-case price assumptions for coal.

With the Western World still in different stages of lockdowns, and the Eastern World emerging from theirs but still far from resuming full-blown industrial production, most metal prices are struggling to recover to pre-COVID-19 levels.

Key Takeaways

  • We lowered our aluminum price assumptions by $100/ton through 2022 and our zinc price assumptions by $100/ton through 2021. These changes represent 6% and 5% drops, respectively.

  • We also lowered our near-term price assumptions for metallurgical and thermal coal due to lower demand.

  • We raised our gold price assumptions to $1,650 per ounce for the rest of 2020 because we believe gold prices will benefit from uncertainty about the global economic outlook and a weaker U.S. dollar.

Market Challenges

Gold Takes a Breather, Market Predicts Higher Prices

The gold price is taking a breather, with eyes on what it will take to propel the metal higher as investors move money into riskier asset classes, sources said June 4.

Gold had been on a stellar run higher throughout 2020, bolstered by the coronavirus pandemic and associated panic as allocations moved into safe-havens. However, since countries have started to ease lockdown measures, and some form of new normality has emerged, traders have been parking their money elsewhere.

Still, the move is leaving some scratching their heads, as central governments pile on debt in the form of a tsunami of fiscal stimulus.

A Decade of Underperformance for Gold Discoveries

Our annual analysis of major gold discoveries has identified 278 deposits discovered over the 1990-2019 period containing 2,194.5 million ounces of gold in reserves, resources and past production. There are no major gold discoveries on our list in the past three years, and only 25 in the past decade. The lack is driven by exploration focusing on older discoveries and later-stage assets.

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African Mines

Barrick Resumes Gold Concentrate Exports from Tanzania

Barrick has restarted its shipment of gold concentrate from Tanzania, having paid the first tranche of the $300-million settlement it agreed with the Tanzanian government to resolve the disputes it inherited from Acacia Mining, the company said May 25th.

"In terms of its framework agreement with the government, the shipping of some 1,600 containers of concentrate stockpiled from Bulyanhulu and Buzwagi resumed in April and the first $100 million received from the sale has gone to the government," the company said in a statement.

Barrick – the world's second largest miner – said all material issues had been dealt with or were being finalized, adding that the initial payment will be followed by five annual payments of $40 million each.

AngloGold Suspends Operations at S Africa Mponeng Gold Mine on Coronavirus

AngloGold Ashanti has suspended operations at the world's deepest gold mine, Mponeng in South Africa, after having identified 164 positive cases of coronavirus, the majority of which were asymptomatic.

"As a precautionary step, and after discussions with the regulator, operations at Mponeng Mine – which were running at 50% capacity -- have been temporarily halted on a voluntary basis, to complete contact tracing and to again deep clean and sanitize the workplace and key infrastructure," the company said in a statement late Sunday.

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Rise in Price

Gold Spot Price Breaks Above $2,000/oz: Analysts

The gold spot price broke above $2,000/oz late Aug. 4 and hit an all-time high of $2,044/oz around 1100 GMT of Aug. 5, analysts said.

"Huge session for the precious on Tuesday [Aug. 4] as gold breaks the psychological $2000 barrier for the first time. The action kicked off in early NY trading, the prospect of further US stimulus is putting pressure on the greenback and treasury yields which provided the catalyst for the rise," analysts at precious metal refiner MKS PAMP said Aug. 5. "Once the recent resistance around $1980 was broken the metal took off, we saw a mixture of macro buyers and real money in conjunction with short covering around $2000."

The LBMA said this is the first time in its 100+ year history that the London price of gold has exceeded $2,000/oz.

Gold Breaks Out to a New All-Time High as the U.S. Dollar Drops

Despite the drop in volatility in many asset classes over the summer, some broke through key support and resistance levels.

The S&P GSCI Gold (TR) was one of them, reaching a new all-time high of USD 1,056.83 on Aug. 6, 2020, eclipsing the previous high from the summer of 2011. The underlying gold futures had reached new highs in several different major currencies over the past year, and they finally broke through in U.S. dollar terms.

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Economic Opportunity

Golden Eye of the Storm

Much has been made of the relative performance of gold since the start of the global COVID-19 pandemic. The S&P GSCI Gold gained 10.2% YTD through April 7, 2020, highlighting its safe-haven status; however, it is worth reviewing this performance and considering what demand drivers may influence gold prices over the coming months.

Race for Russia's Fourth Largest Gold Miner Heats Up as Gold Price breaks record

Three major shareholders are locked in a conflict over the control of Petropavlovsk, the company ranking in Russia's top five gold producers, putting its ownership and premium listing status at stake.

The shareholders are: Prosperity Capital Management, which owns 20% of Petropavlovsk, Everest Alliance, with 7.5% stake, and Uzhuralzoloto Group of Companies, or UGC, which holds 22.7% of stake plus convertible bonds worth 5.97% ownership.

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Gold Set Up for 'Tsunami' of Sales Once Economies Reopen: RAK Gold

A "tsunami" of secondary gold supply is ready to hit the market once global economies get back to normal, Jeffrey Rhodes, principal consultant of RAK Gold, told a webinar on May 19.

The secondary gold supply hasn't hit the market yet even with gold at a seven-year high, John Reade of the World Gold Council, said in the Dubai Multi Commodities Center webinar on how precious metals have been affected by COVID-19.

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Market Volatility

Gold Price Slide Steepest in 7 Years: Analysts

The gold spot price dropped nearly 6% day on day, its fifth sharpest one-day drop over the past two decades and its largest daily fall since the sell-off in 2013, analysts said Aug. 12.

Analysts at precious metal refiner MKS PAMP said gold traded to a high of $1926/oz in early Asian hours before falling $50 to $1872/oz, with gold rebounding toward $1900/oz and then falling again to $1862/oz.

"The $115/oz (5.7%) drop is the worst in over seven years," Canaccord Genuity analysts said in a research note.

"We view today's [Aug. 12] sell-off as a price correction given the strong upward price pressure in gold over the past few months, and more acutely over the past few weeks, rather than the start of a more bearish outlook for gold."

COVID-19 Impacts to Metals Prices: Volatility is Here to Stay - Part 2

While the gold price dropped mid-March along with those for most other commodities and markets, it has since come back strongly on the back of higher financial investment demand. Meanwhile, silver, despite record retail investment, has sunk to its lowest price in 11 years due to lower industrial demand.

Looking at the platinum group metals, or PGM, lockdowns in South Africa and plummeting global auto sales have severely shocked prices. This disruption has kept an uneasy balance, however, and has not yet fundamentally changed the price trajectories of upward for palladium and rhodium, and downward for platinum.

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Transition Between Quarters

Barrick's Q2 gold production down 15% on year

Canadian miner Barrick Gold's preliminary second-quarter gold production fell 15% year on year to 1.149 million oz, with total cash costs up 10% at $716/oz and all-in sustaining cost up 19% at $1,031/oz, the company said Aug. 10.

Barrick -- the world's second-largest gold miner gold – said output the half of 2020 was 2.4 million oz, at the midpoint of the company's 4.6 million-5.0 million oz guidance range for the year. Full-year 2020 guidance for total cash costs is forecast at $650-$700/oz sold and all-in sustaining cost forecast $920-$970/oz sold, it said.

The company said the output was a result of strong operating performances, "particularly from Nevada Gold Mines (NGM) in the United States, Loulo-Gounkoto in Mali and Kibali in the Democratic Republic of Congo."

Analysts see strong Q1'20 gold prices boosting earnings despite coronavirus

Analysts expect strong gold prices to bolster gold mining earnings in the first quarter of 2020, with coronavirus-related mine suspensions mostly weighing on earnings in the second quarter.

In the first quarter, the price of gold climbed and closed at US$1,612.10 per ounce on March 31, up from US$1,520.50/oz on Dec. 31, 2019. While gold prices dropped in mid-March, closing at US$1,475.03/oz on March 19 amid a broader rout in stock markets, the yellow metal recovered relatively quickly as investors sought safe-haven assets.

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COVID-19 Impact

Geopolitical Uncertainty in Wake of COVID-19 May Give Gold Time to Shine

The world is entering a period of deep geopolitical uncertainty, but that could be good for gold prices, industry observers said in presentations to the World Gold Forum. Presenters and attendees logged on to the virtual conference starting April 20 to discuss the gold industry and the COVID-19 outbreak that has roiled global markets and drove the event online. While gold has largely proved its ability to store value through the turbulent market conditions created by the coronavirus, there remain a lot of unknown risks to the sector.

Mining Exploration Insights - April 2020

Mining equities were not immune from the worldwide sell-off in equities due to mounting fear of the coronavirus that began toward the end of February, as S&P Global Market Intelligence's aggregate market value of the industry's listed companies, based on 2,333 firms, was down 16% month over month at US$1.06 trillion, off 29% from a 19-month high of US$1.49 trillion in December. It was the lowest aggregate market value for the sector since May 2016.

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