Gold Market Shows Strong Resilience and Bullish Momentum Amid Economic Uncertainty
The gold market has shown remarkable resilience and bullish momentum in recent weeks, driven by a combination of dovish Federal Reserve policies, robust central bank buying, and positive market sentiment. What are analysts saying about this push forward by the market?
The gold market has shown remarkable resilience and bullish momentum in recent weeks, driven by a combination of dovish Federal Reserve policies, robust central bank buying, and positive market sentiment. As analysts predict potential gains and technical indicators suggest further upside, gold continues to attract investors seeking stability amid economic uncertainty. With prices holding steady above critical support levels, the outlook for gold remains optimistic.
Recent trends indicate a positive outlook for gold prices, with analysts predicting potential gains in the near future. On July 12, Kitco reported, "Prices look to end their second week above US$2,400 an ounce, with analysts looking for a potential move to a fresh all-time high." Despite some volatility, such as the brief dip following the Producer Price Index report, gold has maintained critical support levels. Neils Christensen from Kitco noted, "While Friday's Producer Price Index did take some momentum away from gold, the precious metal was able to hold critical support at US$2,400 an ounce." This resilience has bolstered confidence among investors and analysts alike.
The sentiment among market experts is also reflected in recent surveys and reports. That same day, Ernest Hoffman of Kitco mentioned, "The latest Kitco News Weekly Gold Survey shows industry experts nearly unanimous on gold's bullish prospects for the coming week, while retail sentiment is also firmly in optimistic territory." This widespread optimism is underpinned by the robust performance of gold in the face of economic challenges. For instance, Robert Sinn, in a YouTube video on July 10, highlighted significant movements in gold prices, stating, "Gold moved up from 2360 to tapping US$2400 actually Friday afternoon, and then we gave some back yesterday."
Technical Analyst Clive Maund wrote of Emerita, "Elevated copper and gold grades have been discovered at the La Romanera property, which is good to know given that copper is entering probably its biggest bull market ever."Frank Holmes provided a comprehensive analysis of the impact of inflation on commodities on July 8, as he highlighted their role as effective hedges against rising prices. He cited data from the American Farm Bureau Federation, noting, "The cost of a typical Independence Day spread for 10 people jumped to US$71.22 this year, up 5% from last year and a whopping 30% from five years ago."
Holmes emphasized the correlation between inflation and commodity returns, referencing Goldman Sachs' research: "A 1 percentage point increase in U.S. inflation has historically led to a real return gain of 7 percentage points for commodities." This data underscores the potential of tangible assets like silver, oil, and gold to retain value better than paper assets in times of rising prices.
Regarding the gold market, Holmes observed its impressive performance in 2024, rising 12.8% year-to-date and outperforming many major asset classes. He attributed this resilience to several factors, including continued central bank buying, strong Asian investment flows, steady consumer demand, and persistent geopolitical uncertainties. "Goldman has set a bullish target of US$2,700 per troy ounce for gold by year-end," he noted, citing solid demand from emerging market central banks and Asian households as key drivers. Holmes also emphasized gold's potential as a hedge against both inflation and geopolitical risks, providing a buffer against potential stock market volatility. This perspective aligns with the views of other analysts, reinforcing the positive outlook for gold amid current economic conditions.
Technical analyst Clive Maund echoed this positive sentiment. In his article on June 24, he stated, "We were wholly unfazed by gold's sharp drop last Friday, realizing that in the larger scheme of things, it was just a 'storm in a teacup.'" Maund emphasized the enduring value of gold and silver, particularly in uncertain economic times, asserting, "We know that with the entire world becoming a banana republic gold and silver are and must be the go-to assets." This perspective aligns with the general consensus that the current economic environment is highly favorable for gold.
Federal Reserve Influence and Economic Outlook
The Federal Reserve's monetary policy continues to be a crucial driver of gold prices. Dovish comments from Federal Reserve Chair Jerome Powell have bolstered gold's bullish momentum.
Neils Christensen from Kitco noted, "Gold is seeing fresh bullish momentum following relatively dovish comments from Federal Reserve Chair Jerome Powell, coupled with weaker-than-expected inflation in the Consumer Price Index." These developments have created an environment conducive to higher gold prices, as lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.
Canaccord Genuity Corp. analyst Peter Bell, in a research report published on July 9, 2024, maintained a Speculative Buy rating and a target price of US$5.75 on Dakota Gold's stock.The prospect of rate cuts further supports the positive outlook for gold. Naeem Aslam, Chief Investment Strategist at Zaye Capital Markets, stated in that same article, "At this point, a September rate cut is a done deal." Similarly, Carsten Fritsch, Commodity Analyst at Commerzbank, observed, "An interest rate cut in September is now almost fully priced in, and another one by the end of the year." These expectations are corroborated by the CME FedWatch Tool, which indicates over a 90% chance of a rate cut in September. Such monetary easing measures are typically bullish for gold, as they tend to weaken the dollar and lower real interest rates.
Economic data further reinforces this positive outlook. Joaquin Monfort from FXStreet highlighted on July 11th, "Gold rises after U.S. Consumer Price Index data for June comes out cooler than expected." This sentiment was echoed by Marc Chandler, Managing Director at Bannockburn Global Forex, who stated, "Gold rose for the third consecutive week, helped by lower U.S. interest rates and a weaker dollar." The combination of dovish Fed policies, coupled with ongoing economic uncertainties, provides a strong foundation for gold's continued performance. As central banks around the world grapple with inflation and economic growth, gold remains a favored asset among investors seeking stability and value preservation.
Market Sentiment and Technical Analysis
Market sentiment towards gold remains robust, driven by a confluence of economic and geopolitical factors. Marc Chandler, managing director at Bannockburn Global Forex, emphasized the positive market sentiment by stating, "Gold rose for the third consecutive week, helped by lower U.S. interest rates and a weaker dollar." This optimism is reflected in the bullish projections of analysts who see gold prices reaching new highs in the near future. For example, James Stanley, senior market strategist at Forex.com, remarked, "In my opinion, this is still in bulls' control, and the fact that they held support through Q2, even with multiple bearish formations in play, highlights that control element well."
Technical analysis further supports the bullish outlook for gold. Alex Kuptsikevich, senior market analyst at FxPro, noted, "Gold's climb above US$2,400 bodes well for prices, and he sees potential for a new all-time high that's hundreds of dollars above the previous one." Additionally, the formation of supportive technical patterns indicates strong underlying momentum. Kuptsikevich explained, "From the technical analysis perspective, the potential upside target in gold in case of a resistance breakout is the level of US$2850." This analysis suggests that gold has significant room to run, provided key technical levels are maintained.
Matthew Piepenburg offered a sobering analysis of the economic realities and risks facing global markets. He critically examined the divergence between mainstream narratives and empirical data, highlighting the significant implications of debt-to-GDP levels worldwide. Piepenburg emphasized the ongoing process of de-dollarization and the emerging reality that gold was supplanting U.S. Treasuries as the global reserve asset.
He noted in a July 10 report for Vongreyerz, "The conversation opens with a candid assessment of the common denominator (and common sense) reality of unsustainable debt and its now obvious ripple effects on all the current narratives and debates regarding stocks, bonds, currencies, deflation/inflation and sound vs. fiat money." The growing risks from "private credit pools" and "low-yield junk bonds" underscored the fragility of current market conditions. Furthermore, he argued that even traditionally skeptical perspectives on gold must acknowledge these risks. He reminded, "The outsized risks in credit and equity markets . . . can no longer be relegated to the cynicism of 'gold bug' thinking, as even the finest minds in the stock and bond markets are drawing the same clear conclusions."
On top of these market risks, Piepenburg highlighted the dangers posed by currency debasement. He asserted, "Piepenburg makes an equally blunt case for the risks facing paper money in a global backdrop of open currency debasement." He described how many investors, including the "smartest money," continued to avoid these realities by focusing on wealth measured in depreciating currencies. He shared, "Even the 'smartest money' in the room continues to deny or avoid these realities by measuring their wealth in currencies (melting like ice cubes) and chasing yield in increasingly more dangerous corners of the credit and equity markets."
Additionally, the role of central bank buying continues to underpin the gold market. Bert Melek, Head of Commodity Strategy at TD Securities, forecasted on July 11, "Gold to hit US$2,475 in Q1 of 2025," citing robust central bank demand as a key factor. This sentiment is echoed by the World Gold Council, which noted increased investment demand in Europe, aligning with recent rate cuts. As central banks and investors alike turn to gold as a hedge against economic uncertainty and currency debasement, the precious metal's appeal remains strong. This confluence of positive market sentiment, technical support, and sustained central bank buying positions gold favorably for continued gains.
In summary, the current economic environment, influenced by Federal Reserve policies and broad market sentiment, provides a supportive backdrop for gold. Analyst expectations, technical analysis, and robust central bank demand all point towards a positive outlook for the precious metal. As investors navigate economic uncertainties and geopolitical risks, gold continues to offer a reliable store of value and a hedge against potential market volatility.
These outlooks are likely to benefit gold miners and explorers. With that in mind, here are a couple of companies on our list that may benefit.
Emerita Resources Corp
Emerita Resources Corp. (TSX-V: EMO; OTCQB: EMOTF; FSE: LLJA), a mineral exploration company, recently announced promising drilling results from the El Cura deposit area, part of its wholly-owned Iberian Belt West project (IBW).
Streetwise Ownership Overview*
Emerita Resources Corp. (EMO:TSX.V; EMOTF:OTCMKTS; LLJA:FSE)
*Share Structureas of 6/12/2024Source: Emerita Resources Corp.The recent drilling activities intersected substantial mineralization, indicating potential expansion of the deposit. Drill Hole EC014, the deepest and thickest intercept to date in the El Cura area, intersected 11.4 meters of massive sulfide at approximately 350 meters vertical depth. Located along section 9750E, this drill hole is part of a series of five that have all intersected mineralization, showcasing the continuity of the mineralized zone from near-surface to significant depths.
The addition of a second drill rig is a strategic move to accelerate the exploration program, aiming to test the continuity of mineralization both at depth and along strike.
David Gower, P.Geo., CEO of Emerita, expressed optimism about the results, stating, "We are very encouraged with the recent results at El Cura. Drilling on the western side of the area has returned excellent copper-gold values over significant widths, and this zone is growing significantly." These promising results underscore Emerita's potential for future growth and value creation.
*Technical Analyst Clive Maund has highlighted the significant discoveries made on Emerita's properties in May, particularly at the La Romanera property.
He noted, "Elevated copper and gold grades have been discovered at the La Romanera property, which is good to know given that copper is entering probably its biggest bull market ever with impending massive supply shortages on the horizon and gold is also embarking on a massive bull market." This positive outlook is bolstered by the company's proactive approach to expanding the El Cura deposit and its focus on maintaining high standards of quality control.
Reuters provided a breakdown of the company's ownership and share structure, where management and insiders own approximately 5.33% of the company.
According to Reuters, Michael Lawrence Guy owns 1.75% of the company, David Patrick Gower owns 1.12%, Joaquin Merino-Marquez owns 0.84%, Catherine Stretch owns 0.65%, and Marilia Bento owns 0.4%.
Institutions own 1.11% of the company, Reuters reported.
This includes Merk Investments LLC 1.11%.
According to Refinitiv, there are 247.32 million shares outstanding with 234.13 million free float traded shares, while the company has a market cap of CA$153.3 million and trades in a 52-week range of CA$0.26 and CA$0.78.
Dakota Gold Corp.
Dakota Gold Corp. (DC:NYSE American) has been making significant strides in the Homestake District of South Dakota, a region renowned for its historical gold production.
Streetwise Ownership Overview*
Dakota Gold Corp. (DC:NYSE American)
*Share Structureas of 1/16/2024Source: Dakota Gold Corp.Recently, the company announced drill results from eight additional holes targeting the Unionville Zone at its Maitland Gold Project. These results have garnered positive attention, with notable intersections such as 29.8 grams per tonne (g/t) gold (Au) over 1.1 meters and 3.33 g/t Au over 9.9 meters, highlighting the potential for higher-grade gold mineralization in the area.
Canaccord Genuity Corp. analyst Peter Bell, in a research report published on July 9, 2024, maintained a Speculative Buy rating and a target price of US$5.75 on Dakota Gold's stock. Bell viewed the recent drilling results positively, noting, "This morning's results show that the Maitland target has multiple styles of mineralization, including shallow zones of gold above the deeper high grade." He emphasized the potential for encountering additional parallel structures in the area, which could extend the strike length already more than 3,000 meters.
Dakota Gold's strategic focus on advancing multiple exploration programs simultaneously demonstrates its commitment to developing its South Dakota gold assets. The Unionville Zone drilling is one of three ongoing programs, including deeper high-grade gold exploration in the JB Gold Zone and infill and step-out drilling at the Richmond Hill Gold Project to update the S-K 1300 resource estimate. These initiatives are identified as potential near-term catalysts for the stock, providing significant upside potential.
According to the company, approximately 25% of its shares are with management and insiders.
Out of management, Quartermain holds the most shares at 8.4%, Awde is next at 6.8%, while COO Jerry Aberle holds 4.8%, the company said.
About 26% of the shares are with institutional investors, according to Yahoo Finance and Edgar filings. Top institutional holders include Fourth Sail Capital with 5.3%, Van Eck Associates with 4.1%, Blackrock Institutional Trust Co. with 3.7%, The Vanguard Group Inc. with about 3.2%, Fidelity Management and Research Co. LLC with 2.7%, and CI Global Asset Management with 2.6%.
About 16.5% is with strategic investors, including Orion Mine Finance, which owns about 9.9%, and Barrick Gold Corp., which owns about 2.5%. The rest is retail.
Dakota Gold has a market cap of US$208.7 million, with 87.7 million shares outstanding. It trades in a 52-week range of US$3.25 and US$1.95.
| Want to be the first to know about interestingGold investment ideas?Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
Important Disclosures:
Emerita Resources Corp. and Dakota Gold Corp. are billboard sponsors of Streetwise Reports and pay SWR a monthly sponsorship fee between US$4,000 and US$5,000.As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Dakota Gold Corp. James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.For additional disclosures, please click here.
* Disclosure for the quote from the Clive Maund article published on May 28, 2024
For the quoted article (published on May 28, 2024), the Company has paid Street Smart, an affiliate of Streetwise Reports, between US$1,500 and US$2,500.Author Certification and Compensation: [Clive Maund of clivemaund.com] is being compensated as an independent contractor by Street Smart, an affiliate of Streetwise Reports, for writing the article quoted. Maund received his UK Technical Analysts' Diploma in 1989. The recommendations and opinions expressed in the article accurately reflect the personal, independent, and objective views of the author regarding any and all of the designated securities discussed. No part of the compensation received by the author was, is, or will be directly or indirectly related to the specific recommendations or views expressedClivemaund.com Disclosures
The quoted article represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks cannot be only be construed as a recommendation or solicitation to buy and sell securities.