Gold SWOT: The Google search phrase "how to buy gold" reached record highs in the U.S.

Strengths

• The best-performing precious metal for the week was silver, up 2.77% as hedge funds increased their bullish position size to its highest level in 15 weeks, according to Bloomberg. Agnico Eagle Mines reported an adjusted first-quarter earnings per share (EPS) beat versus consensus, driven by stronger operating performance and lower costs. Notably, the company reported better-than-expected results at Macassa, Fosterville and Kittila. While unit costs were below expectations due to strong operational performance and early signs of deflationary pressure, management reaffirmed guidance across the board.
• Gold mining stocks rose along with the price of the commodity as investors considered safe havens amid First Republic Bank's failure and the Federal Reserve's upcoming meeting, where the central bank delivered another interest rate hike.
• Barrick Gold Corp. reported first-quarter adjusted EPS of $0.14, above FactSet's consensus of $0.13, and adjusted EBITDA of $1,183 million, 6% ahead of the consensus of $1,113 million, due to lower operating costs and favorable non-GAAP adjustments.

Weaknesses

• The worst-performing precious metal for the week was platinum, down 1.98%, on little news. Silver Lake Resources' gold production was 63,000 ounces, 9% below consensus. All-in-sustaining costs (AISC) of A$2,014/ounce was 5% above consensus. Mt Monger performed well, with issues at Deflector and Sugar Zone. The company now expects 2023 group sales to be at the bottom end of the 260,000-725,000 ounce guidance range.

• Franco Nevada reported first-quarter adjusted EPS of $0.79, missing the $0.84 consensus. The EPS miss was driven primarily by lower revenue (fewer ounces). First-quarter production was 145,000 ounces, falling short of the 166,000-ounce consensus using the same commodity price assumptions as the company.
• The decline in palladium and rhodium during the first quarter surprised many in the market, given the ongoing growth in global auto production and downside risk to primary supply. Market commentary has focused on softer Asian spot market demand, growing electric vehicle (EV) penetration, financial/speculative flows, and the liquidation of a large quantity of rhodium metal from a Chinese glass facility.

Opportunities

• According to Google Trends data, the phrase "how to buy gold" has reached record levels in the U.S. (even higher than when gold prices reached all-time highs in 2020). Gold prices are up 9.4% year-to-date and are hovering around $1,995 per ounce at the time of this writing. Investors are still concerned about persistent inflation, elevated interest rates for longer periods and a potential recession—scenarios that have historically been positive for gold.
• Agnico Eagle Mines' focus for the remainder of 2023 is on delivering: (1) 2023 guidance; (2) updated exploration results on the Odyssey underground (expected in June 2023); (3) studies to fill the unused mill at Canadian Malartic, which are expected in early 2024; and (4) an underground resource estimate and technical study on the Detour underground potential (early 2024), including working on the optimization of the mill.
• Osisko Gold Royalties announced a 50/50 joint venture agreement with Gold Fields for the joint ownership and development of Osisko's Windfall gold project, located in the Abitibi greenstone belt of Québec. Gold Fields will make an initial cash payment to Osisko of CAD $300 million on signing, plus a deferred cash payment of CAD $300 million on the issuance of permits for the Windfall project, among others, for a 50% interest in the project. In total, Gold Fields' contingent and deferred payments will be CAD $709 million (USD $525 million), after which Gold Fields and Osisko will share all costs on a 50/50 basis going forward. Gold Fields estimates its investment will ultimately total CAD $1.26 billion.

Threats

• Newmont is currently conducting technical due diligence on Newcrest assets to determine whether to move forward with a binding agreement. If Newmont is successful, it would need government approval from four countries (Australia, Papua New Guinea, Canada and the U.S.) and approvals from both Newmont and Newcrest shareholders.
• Eldorado Gold is undergoing a large mine build, with $850 million in capital expenditures, relative to its size (market capitalization of $1.9 billion). This results in expected negative free cash flow over the next three years. Given that the mine build is large and occurring in an inflationary environment with a tight labor market, particularly for experienced workers, there is above-average risk in the shares.
• The World Gold Council (WGC) reported that central bank gold purchases fell 40% last quarter, marking the second straight quarterly decline. This may suggest that the frenzied pace of central bank gold buying could be coming to an end. Bloomberg reports that central bank purchases accounted for nearly a third of global gold demand in 2022. However, foreign governments are not as keen as they used to be on holding U.S. dollars as a central bank reserve asset.