Top Stories This Week: Gold Nears Bear Market Territory, Where is the Bottom?
[embedded content]Editor’s Picks: Gold Nears Bear Market Territory, Where is the Bottom?youtu.be
Last week brought ups and downs for gold, but it closed the period on a positive note.
The yellow metal spent Monday (September 26) trading between about US$1,622 and US$1,645 per ounce, and dropped as low as US$1,616 on Wednesday (September 28); it had improved by Friday (September 30) to finish at about US$1,660 per ounce.
There’s been no shortage of events for gold to react to over the last five days, but one element that I want to highlight is the US dollar, which has been a consistent headwind for the metal in 2022.
The dollar’s strength was in focus again as the British pound fell to an all-time low against the US currency at the beginning of the week. This big decline came amid a selloff in UK government bonds, and the Bank of England’s intervention to provide stability.
The point many experts have made to me recently is that while the dollar is indeed strong, it’s essentially the “prettiest mare at the slaughterhouse” or the “cleanest dirty shirt in the laundry basket” — in other words, its strength has an expiry date.
Of course, a timeline is hard to define, and for now gold continues to struggle. Some market watchers have even pointed out that its price action earlier this week put the safe-haven metal in bear market territory.
A bear market is typically defined as a period of prolonged price declines and negative sentiment where prices fall 20 percent or more from recent highs, and at its lowest point this week gold was down about that amount from its highest price this year.
I recently heard from Nick Santiago of InTheMoneyStocks.com, who told me that he thinks gold still has further to fall. Back in January, he said he saw the precious metal dropping to at least US$1,500, maybe even US$1,450, and he still believes that move is coming. In his opinion, that’s not a bad thing — Nick said he would be a heavy buyer at the US$1,500 level, which he previously described as a “1999 gold-buying moment.”
“There are going to be bounces in gold, but I still believe that we’re probably headed to that US$1,500 area” — Nick Santiago, InTheMoneyStocks.com
Fastmarkets battery metals and copper takeaways
I mentioned last week that INN’s Priscila Barrera has just attended two Fastmarkets events in Spain, one focused on battery metals and the other focused on copper. Now that she’s back, she’s put together two great write-ups on her takeaways.
In terms of battery metals, conference attendees emphasized that although momentum is building, Europe still has a lot of work to do when it comes to building out its battery metals supply chain. Regulatory support will be key, as will strategic investments. And even then, the region will need to look beyond its borders for raw materials.
Looking at copper, supply was an important topic of conversation at the Fastmarkets conference. It’s no secret that after years of underinvestment, very few new discoveries have been made, and not many copper projects are poised to come online in the near future; aside from those factors, grades are declining.
“Near term there is plenty of uncertainty, but longer term the requirement for new projects remains. But adding mining capacity is getting harder and more expensive” — Graeme Train, Trafigura
The expert speakers noted that although recycling of the metal will increase, it won’t be enough to solve these problems.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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