Gold climbed close to 2 percent on Friday morning (June 21), answering the question of if it would surpass the US$1,400 level, when it peaked at US$1,410.78 per ounce earlier in today’s session.
The yellow metal began its ascent after the US Federal Reserve announced on Wednesday (June 19), that it would be maintaining current interest rates, but also alluded to cuts as early as July of this year.
Gold is currently scaling a six-year high thanks to the dovish tone the Fed when discussing the results from its two-day meeting.
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“The driver for the surge is obviously the Fed delivering the dovish tilt that the market was looking for. It removed the ‘patience’ approach to cutting rates,” stated Ole Hansen, commodity strategist from Saxo Bank.
In addition to the Fed announcement, the precious metal is also being supported by rising tensions in the Middle East.
“There is a perfect mix of ingredients for gold’s rush to the top – a weak macroeconomic environment, low bond yields, soft dollar and rising geopolitical tensions,” stated Howie Lee, an economist at OCBC Bank (SGX:039)
Thanks to a US weaker dollar, sliding yields and the Middle East tensions, the yellow metal has managed climbed close to 4 percent so far this week, which is the metal’s biggest rise since the the end of April in 2016.
Since Wednesday, gold has made gains of over US$70 per ounce and as of 9:11 a.m. EDT, the metal was trading at US$1,397.70 per ounce.
Meanwhile, silver followed gold’s lead following the Fed announcement, but then gave up 1.2 percent of its gains by the end of the week.
Despite this, many analysts seem to be rallying behind the white metal’s potential and in its latest report, FocusEconomics says that analysts it has polled are optimistic about future silver prices.
“Prices should continue to trend higher moving forward. Barring a significant global slowdown, demand for industrial fabrication is projected to rise this year, as should demand for jewelry and silverware fabrication,” the report reads.
The silver price is forecast to average US$16.20 in Q4 of this year, before rising to an average of US$17 in the fourth quarter of 2020.
As of 9:20 a.m. EDT, the white metal was trading at US$15.31 per ounce.
As for the other precious metals, platinum is down nearly 2 percent for the week and as of 9:22 a.m. EDT on Friday, the metal was trading at US$799 per ounce.
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For Palladium’s part, the metal was up 1.43 percent for the week, but down just over 1 percent on Friday. As of 9:43 a.m. EDT, palladium was trading at US$1,487 per ounce — staying above gold, despite the yellow metal’s rally.
Precious metals top news stories
Our top precious metals stories this week include South Africa’s Association of Mineworkers and Construction Union (AMCU) asking for a pay increase of up to 48 percent, gold and silver increasing following the Fed’s two-day meeting and shares of Jaguar Mining (TSX:JAG) rising close to 42 percent on Tuesday (June 18) after proposing a US$25 million non-brokered private placement.
1. AMCU Wants Wages to Increase by Almost 50 Percent
The AMCU plans to ask for a pay increase of up to 48 percent for its members when it begins upcoming wage negotiations.
In a press release issued by the AMCU on Friday (June 14), the union reported that it is looking for a monthly basic wage of 17,000 rand (US$1,145) for its members, saying that the current price of the precious metal makes the increase warranted.
“As a genuine trade union, AMCU remains committed to working with the mandate of our members, in our quest for social justice and economic emancipation,” the AMCU stated.
2. Gold Price at Highest Level Since 2014 After Fed Meeting
Both gold and silver made gains on Wednesday (June 19) after the US Federal Reserve announced it will be maintaining current interest rates rather than cutting them. The news caused the US dollar to tumble and the yellow and white metals to rally.
The Fed made its decision after two days of meetings, ignoring pressure from US President Donald Trump to decrease the current interest rate, which is a range of 2.25 to 2.5 percent.
According to Bloomberg, Trump allegedly looked into options earlier this year for getting Jerome Powell removed as Fed chairman, going as far as asking for advice from lawyers at the White House.
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3. Jaguar Rockets After Announcing US$25 Million Private Placement
Jaguar Mining rose close to 42 percent on Tuesday (June 18) after proposing a US$25 million non-brokered private placement.
The company plans to use the funds to make strategic changes and to expand its presence in Brazil. Jaguar will offer shares at a discounted rate of C$0.085 each; its last closing price prior to the announcement was C$0.12 and the company ended at C$0.17 in Tuesday’s session.
“Completion of the offering will result in an opportunity to increase developed reserves, improve and update the capital equipment and infrastructure, increase gold production, expand reserves, reduce expenses per ounce of gold produced, improve efficiencies and cash flow, and reduce the financial distress caused by debt,” said Benjamin Guenther, interim CEO of Jaguar.
Also in the news
Also this week, Bloomberg reported that the National Union of Mineworkers (NUM), which dominated organised labour across South Africa’s platinum belt until the year 2012, is poising itself for a comeback.
According to NUM President Joseph Montisetse, the union would like to represent 30 percent of the more than 167 000 workers at the world’s four biggest platinum producers, by the end of 2019.
Currently, NUM represents 18 percent of Impala Platinum’s (JSE:IMP) workforce and 11 percent at Lonmin (LSE:LMI). He did not, however, provide figures for Anglo American Platinum (LSE:AAL) or Sibanye-Stillwater (NYSE:SBGL,JSE:SGL), which is taking over Lonmin.
“We have a clear target. I’ve appointed myself to platinum,” stated Montisetse.
Additionally, shares of Silver Mines (ASX:SVL), rose close to 9 percent on Friday when it announced that the environmental impact statement (EIS) for its Bowdens silver project, in New South Wales, is not in the final stages before the Australian silver miner will submit it to the New South Wales Department of Planning and Environment for development consent.
The EIS affirms minimal impacts on surface water and groundwater and local economic benefits within the high unemployment jurisdiction that the project is in. Additionally, the company also noted that the new water pipeline will be built to provide water for processing sourced from nearby coalfields and that the project has a progressive rehabilitation plan in place for the life of the mine.
Life-of-mine production is expected to create approximately 53 million ounces of silver, 116 000 tonnes of zinc and 83 000 tonnes of lead.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.