The Weekly Dig

Mick Carew, PhD,

and The Haywood Mining Team

Another Volatile Week for Gold Following Dovish Fed Comments

Precious Metals: It was another volatile week for precious metals, with gold regaining lost ground after Federal Reserve chairman Jerome Powell hinted that the central bank may be about to finish its interest-rate rises. Although largely reliant on investors’ interpretation of the Fed chair’s comments in New York, his statement that interest rates were “just below…neutral” saw the U.S. Dollar Index fall and the price of gold rise accordingly. However, there was speculation from some commentators that the latest dialogue could be in response to continued complaints from President Trump. After falling to a low of US$1,212 per ounce on Wednesday, the price of gold rallied to finish at US$1,223 per ounce at market close on Thursday, finishing only slightly lower overall for the week. Both the S&P Global Gold Index and VanEck Vectors Junior Gold Miners ETF followed a similar trend over the last week, with both finishing the week relatively unchanged. Tahoe Resources (THO-T, Tender, $4.00 Target) was one of a few major gold miners registering positive returns this week, while in the junior sector, Pure Gold (PGM-V, Buy, $1.00 Target) led the way following the release of assay results from an underground bulk sample that returned higher grades than expected, while Marathon Gold (MOZ-T, Buy, $1.80 Target) and Treasury Metals (TML-T, Buy, $1.10 Target) were among the better performing junior mining equities over the last week. Silver, as usual, followed gold’s lead, finishing 1.4% lower for the week, while platinum was down 3.4% and palladium finished 2.5% higher.

Base Metals: The base metals were mixed week over week (WoW) as of Thursday’s close. LME nickel was the most positively impacted metal up +0.7% to $4.98/lb, while LME zinc and copper were down -3.9% and -0.6% WoW at $1.16/lb and $2.83/lb, respectively. The LMEX Index was down -1.1% WoW at 2,894.0 at Thursday’s close. The S&P Composite Diversified Metals & Mining Industry Index closed Thursday at 4,846.80, which is down -2.79% WoW. Metals are all down YoY with copper, zinc and nickel down -7.2%, -19.2% and -4.2%, respectively. LME inventories were all down WoW with copper, zinc and nickel inventories were down -2.4%, -1.9% and -0.2% WoW, respectively. Excluding bonded warehouse inventories, we calculate the current days of consumption at 6.1 for copper and 4.3 for zinc. The U.S. Dollar Index was flat this week, closing on Thursday at 96.78, having little impact on base metals prices. The base metals equities in our coverage universe were mixed WoW. The most negatively impacted weekly performer in our coverage universe was Copper Mountain (CMMC-T, Buy, $2.00 Target), down -7.5% WoW. The most positively impacted weekly performers in our coverage universe were Capstone Mining (CS-T, Buy, C$0.85 Target), which was up +5.0% WoW on Thursday, and Lundin Mining (LUN-T, Buy, $8.00 Target), which closed the week up 4% following its operational update and outlook. Earlier this week Capstone released an updated Technical Report for its 70%-owned Santo Domingo project and announced the start of a strategic process for the project. This weekend, President Trump meets with President Xi Jinping of China, a meeting which could have longer term repercussions for metals prices. For now, we take solace in positive fundamentals for copper in particular, as mine supply is forecast by the ICSG to slow to 1.2% next year.

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