Revived gold comes shining through
Gold stocks on the Australian sharemarket closed 3.9 per cent higher on Tuesday, led by gold, nickels and base metals exploration company Sirius Resources, the biggest gainer on the S&P/ASX 200 Index at 13.04 per cent.
The price of gold, which has been battered by a strengthening US dollar amid expectations of a possible end to the country's monetary stimulus program, has slipped by more than 20 per cent this year. The gold price slumped to a low this year of $US1184 in late June.
It was trading at $US1333.10 late on Tuesday, a 0.2 per cent fall from Monday's 3 per cent gain. The gold price has risen more than 12.5 per cent in almost two months.
"I think we might be able to see the gold price — over the short term — retraced to about the $US1400 level. I think that's where it runs into some resistance," RBS Morgans' director of equities, Tony Dennis, said.
Mr Dennis said he expected the gold price to rally further, especially as the markets were heading into the seasonally strong months for the gold price: July to September.
But he expected the ongoing trend of a strong US dollar to keep a lid on the price beyond $US1400.
Panaust Ltd finished strongly, with a 5.56 per cent gain on Tuesday, while Newcrest Mining was the fourth-biggest gainer on the ASX 200 at 5.44 per cent. Alacer Gold CDI rose 5.26 per cent while Paladin Energy lifted 3.85 per cent.
But other stocks, such as Medusa, Perseus and Resolute Mining, shed their early gains to close more than 3 per cent lower.
ETF Securities' head of Australia and New Zealand, Danny Laidler, said he expected the recent gold rally to remain sustainable in the medium term amid strong physical demand from China, continued volatility in share markets and less positive economic data from the US and China.
"When you combine that with the fact that the price correction has brought gold back down to an attractive value, then I think in the medium term, the outlook for gold is very positive," Mr Laidler said.
"It's not that people are getting wildly bullish on gold, they're just not as bearish any more."
The price of the precious metal was about $US1600 when it slumped in April, and again in June, pushing some of Australia's highest-cost gold mines into the red. Jobs were shed as miners cut back costs and focused on more profitable mines.
Macquarie Private Wealth analysts said they continued to see gold as as an underperformer in the short and medium terms compared with the broader market, but said low-cost operators such as Regis Resources and Beadell Resources were standouts in the sector.
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The article says the gold sector picked up after an unwinding of short positions and weaker-than-expected US housing data. That pushed the precious metal near one-month highs and helped Australian gold stocks jump, with the ASX gold index closing about 3.9% higher on the day.
According to the article, the gold price has slipped by more than 20% earlier this year — hitting a low of US$1,184 in late June — but has since rebounded. It was trading around US$1,333.10 late on Tuesday, up more than 12.5% over almost two months from the lows.
The piece notes Sirius Resources was the biggest gainer on the S&P/ASX 200, up about 13.04%. Other strong performers included Panaust (+5.56%), Newcrest Mining (+5.44%), Alacer Gold CDI (+5.26%) and Paladin Energy (+3.85%), while some names such as Medusa, Perseus and Resolute Mining gave back early gains and closed more than 3% lower.
RBS Morgans’ director of equities Tony Dennis said the gold price may retrace to about the US$1,400 level, which he expects to act as short-term resistance. He also highlighted July to September as seasonally strong months for the gold price, which could support further rallies.
ETF Securities’ head for Australia and New Zealand, Danny Laidler, told the article he expects the recent gold rally to be sustainable in the medium term, driven by strong physical demand from China, continued share-market volatility and weaker economic data from the US and China, plus the attractive value after the price correction.
The report says gold had been around US$1,600 when it slumped in April and again in June, which pushed some of Australia’s highest-cost mines into the red. As a result, miners cut back costs, focused on more profitable mines and shed jobs.
Macquarie Private Wealth analysts told the article they still view gold as an underperformer in the short and medium term versus the broader market. However, they highlighted low-cost operators such as Regis Resources and Beadell Resources as standouts within the sector.
The article suggests everyday investors weigh a few key factors: gold remains volatile and was hit hard earlier this year, a strong US dollar can limit gains (potentially capping prices around the US$1,400 area), seasonality can help between July and September, and company cost structures matter — low-cost miners tend to fare better. The piece also highlights medium-term supportive factors like Chinese physical demand and market volatility, while reminding readers analysts still see short-to-medium-term underperformance risk versus the broader market.
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