Gold eases as dollar firms – virus fears cap losses

Spot gold was down 0.2% at $1,973.54 per ounce by 0026 GMT. It hit an all-time high of $1,984.66 in the previous session.

Reuters

Gold prices edged lower on Tuesday as the dollar strengthened and risk appetite improved after positive U.S. economic data, while fears over surging coronavirus cases limited losses for the safe-haven metal.
 

FUNDAMENTALS

Spot gold was down 0.2% at $1,973.54 per ounce by 0026 GMT. It hit an all-time high of $1,984.66 in the previous session.

U.S. gold futures rose 0.2% to $1,989.20.
 

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The dollar index rose 0.1% against its rivals, crawling further away from a more than two-year low hit last week. A stronger greenback makes gold more expensive for holders of other currencies.

U.S. manufacturing activity accelerated to its highest level in nearly 1-1/2 years in July as orders increased despite a resurgence in new COVID-19 infections.

Asian shares were on track to open higher on Tuesday, after strong manufacturing data and gains in tech stocks boosted global equities.

More than 18.19 million people have been reported to be infected by the novel coronavirus globally and 689,871​ have died, according to a Reuters tally.

The World Health Organization warned on Monday that there might never be a "silver bullet" for COVID-19 in the form of a perfect vaccine and that the road to normality would be long.

The top Democrats in the U.S. Congress and White House negotiators on Monday said they had made progress in talks on a new coronavirus relief bill.

The U.S. economy, battered by a resurgence in the spread of COVID-19, needs increased government spending to tide over households and businesses and broader use of masks to better control the virus, U.S. central bankers said on Monday.

Silver fell 0.1% to $24.22 per ounce, platinum rose 0.2% to $918.50 and palladium gained 0.3% to $2,090.21.

 

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Gold price hits new record highs, but $2,000 proves strong resistanceNews Bites

Gold is on a cusp of $2,000 an ounce level. Can the yellow metal continue its historic price rally and breach this level, and more importantly, trade above it?

At the time of writing, spot gold was trading at $1,979.10, up 0.11% on the day, after hitting a record high of $1,984.66 earlier in the session. And the December Comex gold futures were at $1,994.60, up 0.44% on the day.

The next move will depend on real Treasury yield, which are heading deeper into negative territory, said Pepperstone head of research Chris Weston.

“My gold sentiment guide has not given any bearish signals just yet and I am happy to hold a bullish bias, believing pullbacks will prove to be shallow and $2k is likely,” he said on Sunday.

U.S. fiscal negotiations will be playing a key role, according to analysts.

“Having passed the expiry of unemployment benefits, we eye this Friday’s ‘soft’ deadline before Congress heads to Summer recess, although there is the option to keep talks going until Monday 10th,” said Weston. “Reports (on Sunday) suggest that House Speaker Pelosi and White negotiators are still someway apart on restoring the $600p/w jobless benefits and that won’t inspire.”

The gold price will be watching the amount of the fiscal stimulus passed, said RJO Futures senior commodities broker Daniel Pavilonis.

“For gold, it will depend on how much stimulus is passed. If they start to wind down the stimulus, then there is a real possibility that gold softens a bit. If they ramp it up and continue to print up money, then gold should move higher,” he said Friday.

A weaker U.S. dollar pushed gold prices to new all-time highs last week and if this trend continues, gold could see more gains going forward.

“Gold prices again tested new highs [Friday] and while real yields remains the key driver, the correlation with the USD has strengthened … the USD testing two-year lows has propelled prices to new highs,” said Standard Chartered precious metals analyst Suki Cooper. “It bodes well for gold, that we expect the USD to weaken and expect real rates to remain negative.”

ING head of commodities strategy Warren Patterson projects weaker U.S. dollar for the rest of the year. “This is one factor which shouldn’t provide too much resistance to potentially higher prices,” he wrote last week.

The drivers are all still there for gold to keep climbing above $2,000 an ounce, Patterson noted, adding that he sees gold ending the year at $2,100 an ounce.

“Clearly the bulk of drivers are telling us that there is further upside to the market, and we believe it is only a matter of time before the market breaks through the US$2,000/oz level,” he said. “We expect prices to face some resistance as it approaches this level like we saw earlier this week.”

Gold investors cannot forget that a price pullback is expected in the short-term, given how quickly prices have moved up. However, the overall trend in gold remains bullish, Cooper stated on Friday.

“Prices are technically overbought; given how quickly prices have rallied, the risk of a temporary pullback has risen. But the balance of risks remains skewed to the upside for gold in light of the macro backdrop remaining exceptionally favourable; any near-term corrections are likely to be viewed as buying opportunities,” she said.

The biggest risks to the gold price rally are a quick and successful roll-out of the COVID-19 vaccine, swift USD recovery, and profit-taking, Patterson said.

Traders should also watch out for a repeat of what happened in March, which could have a major negative impact on gold, Patterson added.

“While a renewed sell-off in risk assets should provide upside to gold, there is the potential that we see a repeat of March, where a selloff in other asset classes, saw investors liquidating gold positions in order to meet margin calls,” he said.

 

By Anna Golubova
For Kitco News

 

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It's a 'challenging time' for gold companies that need to grow – B2Gold

B2Gold (TSX:BTO) is a mid-tier gold company with mining operations in diverse locations: Philippines, Mali, Namibia and Nicaragua. The Vancouver-based company forecasts between 1,000,000 and 1,055,000 ounces in 2020.

 

Johnson said the low precious metal prices of the past decade, plus the overhang from the industry's last spending splurge has diminished the gold supply

"There's been a lack of exploration and a lack of development, so I think the supply of gold probably peaked a couple of years ago," said Johnson.

Johnson said he is not a "gold bug", but the extreme financial stress has favored the metal.

"You can't print gold and there's a finite amount of gold in the world," said Johnson.

He said producers are constrained by several factors if they want to add more production now through acquisitions.

"When you talk about M&A, it's kind of interesting because there aren't many great development projects out there. Investors are nervous about people paying premiums to take over companies, because that didn't go so well in the past. Barrick set an example with the Barrick-Randgold deal where there was no premium in that deal. So I think that it's an interesting and a challenging time for those companies that really need to grow today," said Johnson.

However, some mergers could better for all.

"We're not desperate to go run out and do a deal. We've got great projects, a great pipeline of additional projects. I think you will probably see some more mergers of equals and I think that's good for the industry. I think we need fewer and better run gold mining companies," said Johnson

A future project that should grow B2Gold's production is the Gramalote project in Colombia, a joint venture with AngloGold Ashanti. A feasibility study is planned for the first quarter of 2021. The indicated mineral resource for Gramalote is 2.14 million ounces.

B2Gold announced a fundraising initiative. The company is producing 1000 limited-edition ` Gold Bars to support conversation efforts for the critically-endangered black rhino.

As COVID-19 devastated the tourism industry, wildlife parks across Africa have taken a hit and are in danger of being shut down.

“That’s affected the ability to protect these species. So that’s why the Rhino Bars and the money generated from that is so important to assist today, in protecting the wild and supporting the communities that are doing this work. A lot of budgets would have been cut had it not been what we’re doing,” said Clive Johnson, CEO of B2Gold.

 

By Michael McCrae
For Kitco News

 

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