Mining stocks jump as gold price targets $1,300
On Tuesday, the return of the safe haven buyer and a weaker US dollar combined to lift the metal to its highest level since the election of Donald Trump on November 8.
Gold futures in New York for delivery in August, the most active contract, touched a high of $1,298.80, up more than 1% in heavy volume of more than 24m ounces, before pairing some gains in afternoon trade. Gold is up 12.8% so far in 2017.
Gold's recovery – up $80 an ounce in less than a month – was given fresh impetus from disappointing US jobs numbers released on Friday that hurt the US dollar and clouded the outlook for GDP growth in the world's largest economy. Mounting geopolitical worries including upcoming elections and terrorist attacks in the UK and an escalating row between Saudi Arabia and the tiny state of Qatar drawing in the US and regional powers provided further momentum.
Persistent economic weakness, political uncertainty, and a stock market on edge should keep gold well supported at this higher range in the near term
Analysts at Canada's TD Securities in a note released on Monday said investors continue to show demand for gold as an uncertainty hedge:
Going into a week that contains a testimony by James Comey, an election in the UK, as well as an ECB meeting, there are plenty of reasons for investors to keep gold in their portfolio. Indeed we have seen net positioning grow once again last week as longs continue to build, and shorts likely get squeezed out as gold grinds higher.
Persistent economic weakness, political uncertainty, and a stock market on edge should keep gold well supported at this higher range in the near term. Moving forward the focus will be on the June FOMC meeting to set direction from here. If the Fed maintains their stance that another hike is still in the cards then gold could run out of steam, but should they remain cautious, as we believe they will, gold could move higher and test the $1300/oz level once again.
Gold's leg up on Tuesday saw major gold mining stocks enjoying the best trading day in weeks.
Toronto's Kinross Gold was once again the top performer among the majors with a 9.2% surge
Top producer Barrick Gold jumped 5.2% affording the Toronto-based company a $19.8 billion market valuation in New York. Nearly 4% gains for world number two producer Newmont with output of 5m ounces expected this year, lifted the Denver-based company back into positive territory for the year. Vancouver-based Goldcorp added 4.4% for a market cap just shy of $12 billion.
The third largest gold miner in terms of output, AngloGold Ashanti counters trading in New York leaped more than 7.5% bringing its year-to date gain to 18%. Fellow South Africa-based producers Sibanye Gold, Harmony Gold and Gold Fields all added more than 6%.
Toronto's Kinross Gold was once again the top performer among the majors with a 9.2% surge. The Canadian miner with four mines in the US, a couple in Russia and operations in Brazil and West Africa is now up more than 41% in 2017 affording it a market cap of $5.7 billion.
Other Canadian gold companies also performed well with Agnico Eagle up 5%, Yamana Gold adding 7.4% and Eldorado Gold gaining 5.9%.