Gold SWOT: Gold Continues to Set Repeated Record Highs

Strengths

• The best performing precious metal for the week was palladium, up 10.10%. Palladium surged after the U.S. asked G7 allies to consider sanctions on Russian exports of the metal. The Biden administration floated potential restrictions during a meeting of G-7 finance officials in Washington this week as it mulls fresh ways to squeeze President Vladimir Putin’s war efforts, according to Bloomberg.
• Wheaton Precious Metals’ unit has entered a definitive pact with Montage Gold in respect to its Kone Gold Project, according to a statement. They will pay Montage total upfront cash of $625 million in four equal installments during construction. This project is expected to have a 16-year mine life based on reserves, with first production anticipated in early 2027, according to Bloomberg.
• Gold extended its rally to a fresh record high, amid tensions in the Middle East and as traders looked toward the U.S. presidential election. Bullion rose higher — having breached the $2,700- an-ounce threshold — with analysts attributing gains to haven demand amid uncertainty around, according to Bloomberg.

Weaknesses

• Gold was the weakest-performing precious metal this week, though it still managed a slight gain of 0.91%. RBC reports that Newmont’s third-quarter results fell below expectations, with EBITDA -16% under consensus. Key factors included significantly higher third-quarter costs and a revised full-year cost increase of 9% over previous guidance. Generalist investors, who had bought Newmont shares following a strong second-quarter report, sold off the stock, leading to a 16% decline over the week.
• RBC reports that Calibre Mining announced third-quarter 2024 gold sales of 46,100 ounces, falling short of both consensus estimates of 74,000 ounces and RBC’s own estimate of 76,500 ounces. Due to these lower-than-expected results, Calibre reduced its annual production guidance from 275,000–300,000 ounces to 230,000–240,000 ounces and raised its cost guidance. Production delays were attributed to adjustments needed for newly opened underground workings.
• BMO reports that Petra Diamonds released its first-quarter fiscal 2025 operating results, along with sales outcomes from its combined Tenders 1 and 2, held after the quarter ended. Diamond production fell short of BMO’s estimates due to operational adjustments at the Finsch mine. First-quarter revenue was affected by Petra’s decision to postpone Tender 1 in response to weaker market demand.

Opportunities

• RBC reports that Bellevue Gold posted a first-quarter cash flow beat of A$40 million above consensus, driven by lower costs, while production and growth capital expenditures aligned with expectations. Bellevue achieved strong cash flow and unit costs of A$1,892 per ounce (against a fiscal 2025 guidance of A$1,750–1,850 per ounce), despite processing more lower-grade tons than anticipated in the first quarter. RBC expects grades to improve throughout fiscal 2025, along with a steady increase in mine tonnage.
• According to Scotia, silver is currently trading near $34 per ounce, up 42% year-to-date, having broken above the prior resistance in the mid $32-per-ounce level, though still below the all-time highs near $50 per oz reached on two prior occasions in 1980 and 2011. The Silver Institute has also noted that the physical silver market recorded a deficit in each of the last two years, with another deficit forecast for 2024. Furthermore, they continue to see silver supply growth challenged in jurisdictions such as Mexico in particular.
• Shares in Chow Tai Fook, one of China’s biggest gold retailers, rose as much as 10% as Morgan Stanley noted the retailer’s sales were showing signs of recovery. Gold’s momentum in China had slowed such that domestic prices were trading at a discount to international prices. If this is a real change in sentiment for gold as proxied by jewelry-buying, this could be a renewed catalyst to take prices higher.

Threats

• A ruby smuggling syndicate circulated a disinformation campaign that the Gemfields ruby mine was opening its mine to anyone that wanted to mine. Thus, about 300 people on Sunday invaded a pit at Gemfields Group Ltd.’s ruby mine in Mozambique, which accounts for about half the world’s supply of the stones, CEO Sean Gilbertson said. Two people were shot and injured by police, he said. A crowd of about 500 people later gathered at a village near the Montepuez ruby mine in northeastern Mozambique intending to enter the mine.
• Newmont’s recent earnings call revealed operational challenges, with a downward revision in production due to underperformance at key mines, leading to a 16% share drop for the week. This, alongside Barrick’s disputes with the Malian government over profit sharing, highlights the increasing geopolitical and operational risks in the gold industry. These pressures threaten the ability of major miners to meet growth targets, suggesting a need for potential M&A as reserves dwindle.
• Morgan Stanley indicates mining companies have cut production and cancelled rough sales, such as Petra Diamonds and De Beers, to reduce historically high inventories. Prices also remain under pressure, with implied September rough prices decreasing 27% month-over-month and 32% year-over-year.