Gold prices are reacting along with gold stocks and company shares in the week ahead of scheduled meeting to be held by the US Federal Reserve and the European Central Bank. Following several rounds of interest rate cuts and stimulus packages aimed at extending financial aid to struggling businesses to counter an impending economic collapse, investors are starting to pull away from the yellow metal.
Gold remains under pressure near $1,700 an ounce as positive market sentiment returns ahead of easing coronavirus measures and reopening economies. Investors are losing interest in safe havens and instead focusing on policy announcements from key central banks as well as promising company stocks.
As a result gold prices slipped for a third day as governments move toward easing lockdown restrictions. Gold is still near its highest in more than seven years amid the health crisis. Investors are also tracking the stimulus by governments and central banks to aid growth, with the Federal Reserve and the European Central Bank due to make policy announcements on Wednesday and Thursday, respectively.
Despite gold still hovering around a record high, the price has backed away from best levels. “The gold market is in a wait-and-see mode ahead of the central bank meetings,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. A weakening dollar is providing some support as investors are waiting for fresh drivers and, most importantly, a breakout, he said.
Spot gold fell as much as 1.3%, sinking below $1,700 an ounce before paring some losses as the dollar eased. It traded down 0.3% at $1,708.90 at 12:01 p.m. on the TSX.
As a result, investors are moving away from bullion towards a diversified basket of gold producers. Shares in Canadian junior gold miners are proving to be popular in these times as they are not as sensitive to gold price fluctuations on the market. Although outlook is very much dependent on the gold price trending higher, with junior gold mining companies, the prospect of high returns is connected to current projects and future drilling plans.
Most recently, gold miner FALCON GOLD CORP. (TSXV: FG) announced the completion of drill hole CC-20-01 at the Central Canada Project. The hole was drilled to a depth of 201 metres and targeted the Central Canada Mineralized Zone along strike from the historical Central Canada Mine. The hole is the first of a series of planned holes in a 1,000 meter program. Successful tracing of gold mineralization and the new drilling efforts undertaken by management paid off as shares in the gold mining company shot 60% in the last month.
Falcon was at $0.035 per share. It’s at $0.055 now, marking a 63% rise. The last three days of trading have seen a big upward shift in buying volume as the story has started to attract the interest of investors, with over 12m shares traded out of only 60 million outstanding.