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« SSR Mining Inc Continues To Mature | Main | Miners discover gold, but few celebrating: New Zealand »
Wednesday
Jan302019

Gold And The mining Stocks Come Alive 

Preamble

After 6 torrid years in the precious metals sector of the market gold and the associated mining stocks have given us a glimmer of hope.

There are two main drivers behind this, the first is that the markets in general are retreating and investors are looking for alternative market sectors for their investment funds. The S&P500 hit the dizzy heights of 2900 before correcting to 2350 and then bounced to around 2681. Having had a ten-year run a correction is to be expected and we are of the opinion that there is more to come on the downside, with the precious metals sector being the beneficiary.

The second driver is that the Federal Open Market Committee (FOMC) meeting has just concluded resulting in a loosening of monetary policy which has a downward effect on the value of the dollar and inversely puts upward pressure on gold prices. The statement issued by the Fed contained no monetary policy changes, but they are now intent on being “patient” on future rate hikes due to subdued inflationary pressures and global economic growth not being as robust as they anticipated. As expected, interest rates remained unchanged.

Gold jumped about $8.00/Oz and silver managed to push through the $16.00/Oz level with the precious metals mining stocks joining in the fun with some of them adding 3% to 4% on the back of this meeting.

We retain our opinion that there will zero rate hikes in the US this year and that the dollar will fall, and gold will rise.

Chart of gold’s recent progress

A quick look at the chart reveals the following;

A golden crossover has been formed which should be positive for gold, although it should be noted that gold had gained $100/Oz prior to this crossover, so some of this effect is already baked into the cake.

 

Given the above-mentioned fundamental influences we would expect 

MORE

No rate hikes in the US this year is the way we see it, so the dollar will fall and gold will rise.

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