Resource World Magazine

24 www.resourceworld.com A U G U S T / S E P T E M B E R 2 0 1 9 F or the past six years – until early June – each time the price of gold broke through the US $1,350/oz level, it would fall back, leaving gold bugs frustrated because they believed the fundamentals were in place for a sustained rally. Gold's rally appears to be holding around the psychological level of US $1,400/oz that analysts attribute to a dov - ish stance by the Federal Reserve and several geopolitical events, including the US-China trade dispute and Iran-US mili- tary activity centred around the Strait of Hormuz through which over 30% of the world's oil is shipped. Just the idea of a serious military deployment involving the Iran and the US has resulted in gold taking its historic role as a safe haven. The rise in the gold price had an imme - diate dramatic effect on both mid-tier and senior gold producers such as Barrick Gold Corp. [ABX-TSX; GOLD-NYSE], Kinross Gold Corp. [K-TSX; KGC-NYSE], Newmont Goldcorp Corp. [NGT-TSX; NEM-NYSE], Alamos Gold Inc. [AGI-TSX, NYSE], Pretium Resources Inc. [PVG- TSX, NYSE], to name a few. The shares of Eldorado Gold Corp. [ELD-TSX; EGO- NYSE] more than doubled in value. As far as juniors go, it is a mixed bag. The Van Eck Vector Junior Miners ETF has risen smartly; however, the "basket" of companies includes some smaller pro - ducers, making GDXJ not an accurate representation of the junior exploration sector. Although not totally comprised of junior explorers, the TSX Venture Exchange is heavily weighted in junior miners and its Index has fallen below 600 and can't seem to get any traction to per - form better. Is this a junior miners buying opportunity? Some analysts think so, including Jordan Roy-Byrne who publishes The Daily Gold Premium. He is of the view that there is little resistance from US $1,420/oz and the low US $1,500s. He has pointed out that gold is outperforming all major currencies, the Fed is probably planning more rate cuts and the US dollar has lost its uptrend. He thinks that if gold outper - forms the stock market then the yellow metal could go to US $1,900/oz. Other analysts think gold could rise to several thousand dollars in value. Meanwhile, international markets are seeing continued robust demand for gold. Indeed, a Bank of America Merrill Lynch metals strategist notes that India's gold demand could double this year. Central banks are the biggest play - ers in the global gold market. The World Gold Council reported that in 2018 central banks bought a record 651 tonnes of gold, the highest level in net purchases since 1971 and a 75% increase from 2017. A recent and most interesting develop - ment in gold's favour took place on April 1, 2019 when what is known as the Basel III regulations went into effect around the world. This means that gold has been upgraded and banks can now consider physical gold as real money and can be viewed as a 0% risk asset. This is a another step in the re-monetization of gold. In the July 5 Insights newsletter of the Sprott Gold Bulletin, Special Contributor, Paul Wong, CFA, a geologist and for- merly a Senior Portfolio Manager at Sprott Asset Management specializing in natural resources investment analysis, provides some analysis of the recent developments in the gold and gold mining sector. Wong writes, "To recap gold's positive trend over the past few weeks, gold trad - ing above the US $1,370/80 per ounce level verifies a critical multi-year base breakout. Gold's rise has been impressive as multiple assets have corroborated the move, and the price action on many gold-related assets has been emphatic. The U.S. Dollar Index (DXY) broke below its 200-day moving average and bond yields declined across the board." He went on the say that the sheer number of chart breaking patterns across various asset classes in the past few weeks typically occurs at market inflec - tion points; that is, a turning point that foretells a dramatic change. "We also saw volatility spike as the SPDR® Gold Shares (GLD) put-call ratio collapsed, indicat- ing buying panic in gold options," Wong noted. "Net gold exposure in the futures market and inflows into gold ETFs also affirms the bullish positioning as levels were the strongest since 2016. Gold mining equities also had intense buying action, and our money flow indicator surged." What can we expect in the near future? "Given the impressive gains in gold bul - lion and gold stocks over the past few weeks, we would expect to see some consolidation as the market absorbs and digests this latest price action," said Wong. "In the weeks ahead, we believe that the market will continue to price in lower interest rates. Equity markets are recover - ing to new highs despite negative news as Gold on the move GOLD AND GOLD STOCK FANS ARE EXCITED WITH THE BIG RISE IN GOLD PRICES AND SHARES OF GOLD PRODUCERS. HOWEVER, EXPERIENCED INVESTORS ARE NOT OVERLY EXUBERANT – THEY HAVE BEEN DISAPPOINTED BEFORE. by Ellsworth Dickson

• Cover