Commodity Trade Mantra

SWOT Analysis – Where are Gold Prices Headed?

SWOT Analysis - Where are Gold Prices Headed?

SWOT Analysis – Where are Gold Prices Headed?


  • The best performing precious metal for the week was platinum, however still down -2.35 percent. Price action was driven by increased auto demand in the European Union, reports Market Realist, which rose 14 percent in February. Platinum and palladium is used in the production of catalytic converters.
  • Germany announced this week that it wants half of its gold reserves back by the year 2020, reports Bloomberg. Bundesbank, the country’s central bank (which has gold in London and New York), has repatriated 1,400 metric tons, or 41.5 percent, of Germany’s gold reserves to Frankfurt.
  • Even though gold prices haven’t done much this month, investors are still pouring cash into gold exchange-traded funds, reports Bloomberg. Gold ETF assets continue to increase, with holdings currently near a two-year high.


  • The worst performing precious metal for the week was silver, down -3.96 percent. The precious metal plunged on Wednesday, and remains low today, mainly driven by a stronger U.S. dollar.
  • The U.S. dollar gained this week against all major peers, causing gold traders and analysts to turn bearish for the third time in four weeks, according to Bloomberg. The dollar was boosted on prospects for higher U.S. interest rates, in turn cutting the precious metal’s appeal as an alternative investment. This week gold prices headed for the biggest weekly slump since November.
  • As seen in the chart below, Bloomberg reports that the gold momentum gauge is flashing a bearish sign as the metal’s rally has started to fizzle. Head of metals research for Societe Generale, Robin Bhar, told Kitco News that the recent gold price rally looks unsustainable. Bhar cited financial turmoil and expectations that the U.S. and global economies will fall into recession have been the factors behind the move, reports Kitco, although these appear to be extreme scenarios.


  • A prominent forecaster from JPMorgan Chase believes investors are better off betting on gold, explaining that the market’s rally is in trouble. An article on CNBC clarifies Marco Kolanovic’s view that the popular trade of being long momentum stocks against a short position on S&P 500 is being unwound. Kolanovic is widely followed by the hedge fund industry and concludes the rally in the broader market has been driven by short covering of bets that the market would fall, thus if stocks reverse, gold should be a beneficiary of the shift.
  • Reuters reports that the 19-day strike by Indian jewelers finally came to an end on Saturday, after government assured they will not be “harassed” by the excise department in collecting a new tax. The jewelers went on strike at the beginning of March following the reintroduction of a 1 percent excise duty on gold jewelry after four years.
  • Klondex Mines reported fourth quarter and year-end results after market close on Thursday.  The results were positive with costs coming in better than expectations and free cash flow higher than forecast.  Klondex forecasts a 16 percent increase in production for 2016, while most companies are flat-to-negative on growth.  Cash balances increased 30 percent for the year.  We expect further positive developments as we see 2016 progress.


  • A wholly-owned subsidiary of Kinross Gold Corp., Compania Minera Maricunga (CMM), was notified by Chile’s environmental regulatory authority of a resolution starting a legal process, according to a news release on March 21. The resolution will seek to require CMM to close the Maricunga mine’s water pumping wells located in the Pantanillo area of Region III due to drought. Kinross responded stating it is committed to responsible environmental management.
  • James Bullard, president of the Federal Reserve Bank of St. Louis, told policy makers this week that they should consider raising interest rates at their next meeting, reports Bloomberg, which would help boost the greenback. Gold has fallen to its lowest in a month as the dollar advance saps up demand in addition to some policy makers saying that recent economic data justifies tighter monetary policy.
  • Gold miners are letting the hedge grow, writes Peter Ker. The price of gold has neared record highs in Australian dollar terms, with the largest gold miner on the ASX deciding to embrace hedging. On Thursday, Newcrest Mining confirmed that a portion of the gold produced at the Telfer mine in Western Australia has been hedged until 2018.  This could signify that miners don’t believe the high gold prices can last.




Courtesy: Frank E. Holmes

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