The headline may be gold is down, but it’s more a case of the US dollar going up.
In case you missed it, gold finished yesterday’s trade in the US down 0.3 percent on spot and 0.4 percent in the futures market — and it was mostly the effect of a debt deal struck between Donald Trump and the US congress.
They agreed to effectively lift the level of debt the US government can raise, meaning there is now less likelihood of the government shutting down for extended periods, as it has in previous years.
While more debt isn’t necessarily a good thing for a government already drowning in it, the market was relieved that government paycheques would be delivered to federal workers on time.
It all meant that the greenback was stronger against the gold price, driving the precious metal down — but there was more economic data out which capped the gains against gold.
According to Reuters, the Richmond Fed put out weaker-than-expected US home sales and monthly manufacturing data — and while it wasn’t the most earth-shattering data, it was enough to put the frighteners through a few buyers.
“The Richmond print raised a few eyebrows, though it’s really not that important of a figure, but seemed to have triggered some buying,” head of base and precious metals derivatives trading at BMO, Tai Wong, was quoted as saying.
“Gold is likely to stay within the $1,415-35 range with the market getting all bulled up above $1,430 and hand-wringing below $1,420.”
The negative economic data increases the likelihood of the US Federal Reserve needing to lower rates — and while the market has largely priced in a 25 basis point cut, the ongoing weakness in the US economy makes the case for 50 points.
Luckily for Australian investors, there are a swag of gold companies both listed and unlisted to look at.
For example, ASX-listed Musgrave Minerals (ASX:MGV) holds the Cue Project in the Murchison district of WA.
It’s identified a more than 28km long prospective gold corridor that hosts both the Break of Day and Lena gold resources; the former hosting 868,000 tonnes at 7.15 grams per tonne gold for 199,000 ounces and the latter hosting 2.6Mt/oz @ 1.77g/t Au for 153k/oz.
There are also other companies seeking a listing to take advantage of the supportive environment for gold, including Advent Gold, which is making good progress on its Reefton project in New Zealand — you can read about the company here.
Star Investing has a commercial partnership with some companies mentioned in this article. This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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