Gold rises amid mounting global uncertainties

Gold was the best performer among the metals commodity price deck during the week ended May 21 amid mounting inflation fears, rising COVID-cases in Asia and political tensions in the Middle East.

The gold price on the London Metal Exchange was up 2.1% on a weekly basis to US$1,876.40 per ounce, hitting the highest in three months during the week. SP Angel noted May 18 that "expectations for further increases in consumer prices could further boost gold’s appeal" although the Federal Reserve called the latest inflation data “transitory”.

In China, Chinese Premier Li Keqiang stressed the importance of controlling high commodity prices in cabinet meetings, saying the government would take measures to increase domestic supply. Beijing has shown increasing willingness to deal with the fast-rising commodity prices in the country and prevent inflation since late March.

The COVID-19 situation continued to worsen in Asia. In addition to a recent spike in infected cases in India, Taiwan reported a surge in domestic cases after months of safety and few restrictions, Reuters reported.

In the Middle East, tensions remained amid the heaviest fighting in years in the Gaza Strip although there was a ceasefire between Israel and Hamas.

Price ring

S&P Global Platts' IODEX 62% iron ore fines CFR North China plunged 4.4% to US$200.10 per tonne during the week. Platts said in a May 21 report that "liquidity in the seaborne market is drying up across products with more participants waiting on the sidelines for potential policy moderation on overall commodity prices."

Most of the industrial metals dropped. Copper fell 2% week over week to US$10,011/t, while aluminum was down 1.4% to US$2,403/t. Nickel dropped 2.1% to US$17,047/t, and lead rose 3.5% to US$2,223.5/t. Zinc was 1.9% up to US$2,981/t.

Silver was 0.7% up to US$27.45/oz.

Talking points

Amid the rise in gold prices, Rhona O’Connell, StoneX's head of market analysis for Asia, Europe, the Middle East and Africa, said inflationary forces are "less significant for gold than what real yields are doing."

O’Connell said the rise in gold is driven not only by the level of real interest rates but also rising COVID-19 cases in Asia as well as mounting political tensions in the Middle East.

"So the market is awash with conflicting forces. All of which is to gold’s benefit as gold thrives on uncertainty," the analyst wrote in a May 17 note.

Financings

Metinvest BV signed an agreement with Ukreximbank to restructure and transfer over 1.5 billion Ukrainian hryvnia in debt held by Donetsksteel Group to the company's Pokrovskoye coal business.

Artemis Gold Inc. raised about C$115 million after closing the bought-deal offering component of a previously announced equity offering of up to C$171 million.

K+S AG terminated its syndicated credit line of €350 million with state development bank KfW and other banks.

Imperial Metals Corp. intends to raise C$60.2 million in a rights offering to fund its share of expenditures at its Red Chris copper-gold joint venture with Newcrest Mining Ltd. in British Columbia.

Skeena Resources Ltd. closed a bought-deal offering to raise C$57.5 million in proceeds that it will use to advance the Eskay Creek and Snip gold projects in British Columbia as well as for general ‎administrative and corporate purposes.

PJSC Novolipetsk Steel launched a tender offer for US$700 million of its 4.500% loan participation notes due 2023 and US$500 million of its 4.000% loan participation notes due 2024.‎

Anglo American PLC launched tender offers for US$750 million of its 5.375% senior notes due April 2025, US$650 million of its 4.875% senior notes due May 2025 and €600 million of its 1.625% guaranteed notes due September 2025.

Constellium SE launched a proposed private offering of about €300 million of sustainability-linked senior unsecured notes due 2029.

Marathon Gold Corp. said it seeks to raise C$50 million through a nonbrokered private placement to support its exploration and development activities at the Valentine Lake gold project in Newfoundland and Labrador.

As of May 21, US$1 was equivalent to 27.58 Ukrainian hryvnia.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.