PRECIOUS METALS

Gold poised to move higher

WHILE gold is languishing at a three-week low, analysts don’t expect it to remain there for long.

 Image: iStock/hernan4429

Image: iStock/hernan4429

Spot gold was trading at US$1909 an ounce this afternoon as the biggest events on the annual gold calendar kicked off in Colorado.

The Precious Metals Summit in Beaver Creek is underway, which will be followed by the Gold Forum Americas next week.

Late last week, Macquarie lifted its gold price forecasts for the remainder of this year through to 2025.

It sees gold averaging $1950/oz in the December quarter, up from $1850/oz before rising in 2024.

The bank increased its March and June quarter 2024 forecasts by 14% to $2025/oz and $2100/oz, respectively.

Overall, it expects gold to average $2019/oz in 2024, before falling to $1800-1900 in the following three years.

"The fact that gold looks so rich on a cross-asset basis leaves risks for a sell-off, with the potential for another hike and dollar strength from US outperformance, but it has already withstood exactly the drivers (namely higher real yields) that we previously argued should cause it to correct," Macquarie said.

"Rates have been higher for longer, the dollar has firmed, ETFs have liquidated, CME positioning has added shorts, and yet it's been held up by the (in)visible hands of the market. Specifically, a combination of central bank and physical buying, as well as less financial selling than we would have expected given cross-asset market dynamics."

Macquarie says the balance of risks is now for prices to be materially higher in the first half of 2024.

"In a scenario where ETF holdings recovered to 95Moz and CME net length was back at 250,000 lots, we would expect gold to breach $2100/oz," it said.

ANZ Research said gold prices had held up well in the face of rising US bond yields and a strengthening US dollar.

"We believe investors will increase ETF holdings for gold as the Fed nears the end of its rate-hiking cycle," it said.

"A revival in investment demand will be crucial for the gold price to trade above $2000/oz in 2024."

ASX gold stocks

In light of Macquarie's revised forecasts, it lifted price targets for most of the stocks under its coverage by 4-15%.

It downgraded Capricorn Metals from outperform to neutral on recent share price strength.

Of the 16 Australian stocks under its coverage, it has an outperform rating on 13 with an underperform rating for Evolution Mining.

Analysts are under research restrictions on takeover target Newcrest Mining.

Macquarie's top picks are Northern Star Resources among the larger producers and Ramelius Resources from the smaller-cap producers, while Westgold Resources got a mention alongside Ramelius for being the only two stocks to guide lower costs in FY24.

In the development space, Macquarie is positive on De Grey Mining ahead of the definitive feasibility study for the Mallina project.

Meanwhile, fellow Australian bank Morgans rates Regis Resources as its top pick.

"Cost continues to trend upward for the gold producers. Escalating costs and diminishing grades/reserves could potentially drive an uptick in M&A," analyst Sharad Bhat said.

"While the general sentiment within gold explorers remains subdued, there is significant investment and liquidity flowing into cashed-up mid-tier gold producers.

"The mid-tier gold producers with a strong balance sheet and cash-generative assets are well-positioned to lead consolidation efforts.

"The potential deal flows depend upon healthy resource and reserve inventories, along with synergistic gains for the acquirors. Deposits/projects with mineral resource and ore reserves near mid-tier miners are likely to be attractive targets."

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