Gold miners post broad losses as spot gold prices drop after the Fed forged ahead with an interest rate increase and additional plans to tighten monetary policy; gold futures now -0.6% to $1,260.40/oz.
SPDR Gold Shares ETF (GLD -0.6%) retreats back towards yesterday's lows of the week near the $120 level.
Gold prices head for their highest finish since November, with analysts attributing at least some of the gains on safe-haven demand sparked by tensions in the Middle East; August gold currently +1% at $1,295.80/oz.; silver +0.7% at $17.70/oz.
With traders already favoring safety plays ahead of Thursday's U.K. election, European Central Bank announcement and former FBI director James Comey’s Senate testimony, “the conflict between Saudi Arabia and Qatar has taken this trade to another level altogether,” says ThinkMarkets chief analyst Naeem Aslam.
Citigroup analysts take it all in stride, reiterating its view that precious metals may see prices peak in the current quarter "absent a tail-risk event such as a non-Conservative majority [in the U.K.] prompting a safe-haven bid.”
Mining names populate the list of today's biggest gainers: IAG +8.8%, GSV +8.1%, HMY +7.3%, GFI +6.7%, BTG +6.2%, SBGL +6.2%, AGI +6%, AG +5.9%, NGD +5.9%, KGC +5.8%.
“Traders’ expectation that Le Pen will not become the next French President has resulted in a technical correction for gold and silver,” says Chintan Karnani, chief market analyst at Insignia Consultants, and if the technical correction continues until Friday, it would “mark the beginning of a short-term bearish phase."
Results are exacerbated by a relatively rare quarterly earnings miss from Barrick Gold, which had beaten in five of the previous six quarters, hurt by lower production and higher costs than expected; Newmont Mining is down 5% even after a Q1 earnings beat with a 2017 outlook that remained mostly unchanged.
Gold miner shares jump after spot gold spiked as much as 1.3% intraday after the Fed raised its benchmark rate and forecast two more rate increases this year as inflation approaches its 2% target.
Investors also were focusing on today's Dutch elections, which have been boosting gold's safe-haven appeal; the nationalist party is not seen as likely to gain power, but a strong election performance would fuel worries over a surprise result in upcoming French presidential elections.
Spot gold surged 1.3% to $1,214.90/oz. and has since eased back to +0.8% at $1,212.50; silver now +1.2% at $17.13/oz.
The biggest risk facing the world's top gold producers is their reluctance to hunt for big new discoveries in emerging markets, Randgold Resources (NASDAQ:GOLD) CEO Mark Bristow says.
The industry since 2000 has been mining gold at a faster rate than it finds new reserves and must intensify exploration and development in emerging markets to address supply problems, Bristow believes.
The industry has discovered ~10M oz./year of gold while producing 90M oz. over the past five years, and the CEO says more investment in emerging countries is the only way to change the equation.
Gold pushes past $1,200/oz. to its highest price in seven weeks, as the dollar weakened in reaction to Pres.-elect Trump’s first post-election news conference.
Traders were disappointed by the press conference, as it brought little discussion of economic policy plans - “Instead, the press conference was dominated by verbal sabre-rattling, which highlighted the risks of a Trump presidency,” according to metals analysts at Commerzbank.
“Unless the dollar can rally strongly, which I doubt, then gold should continue to grind slowly higher,” says David Govett, head of precious metals at brokerage firm Marex Spectron.
Other analysts warn that gold's 7% bounce since Dec. 15 may be running out of steam because the dollar likely would rebound once Trump moves forward with his economic plans.
Mining stocks will enjoy a strong 2017, thanks to industry-wide trends toward improved free cash flow, upward earnings momentum and the potential to return excess capital to shareholders, Citi analysts say.
However, stocks in the group are not likely to see the same percentage increases as in 2016, and the odds of mining overperforming the rest of the market are weak, Citi says.
The firm believes the fear of missing out on another year of outperformance is more likely to win and draw more investors into the sector; its favorite stocks in the sector include Barrick Gold (NYSE:ABX), Teck Resources (NYSE:TECK) and Lundin Mining (OTCPK:LUNMF).
The yellow metal has inched higher overnight but is on track for a sixth weekly loss that has been driven by a more aggressive Fed, investor enthusiasm about Pres.-elect Trump’s policies and ETF sales.
As of Thursday’s close, gold had retreated 17% from July’s high, nearing the 20% loss that commonly defines a bear market.
Overstuffed bears are taking some profits in gold and silver today as the strong November jobs report confirms what most already knew - the economy is cruising along and a rate cut is coming this month.
Gold is higher by 0.6% and sliver by 1.5%.
The precious metals miner ETFs: GDX +3.7%, SIL +4.1%
Precious metals miners are slammed as gold prices dip well below $1,300/oz. to settle at $1,269.70, its lowest since the U.K.'s Brexit vote in June, as upbeat U.S. manufacturing data yesterday has stoked expectations of higher interest rates.
Gold is “falling off the cliff,” says Naeem Aslam, chief market analyst at ThinkMarkets. “Traders are buying the equity market with both hands, especially over in the U.K.” as the British pound declines.
Newmont Mining (NYSE:NEM) was today's best-performing stock in the S&P 500 and precious metals miners gained across the board, enjoying a big boost from the Fed’s decision to keep interest rates unchanged.
NEM even outperformed the VanEck Vectors Gold Miners ETF (NYSEARCA:GDX) - +7.5% vs. +7% - and Credit Suisse analysts say business in looking up for the miner, as NEM continues to meet or beat cost and production targets, as well as strengthen its portfolio.
The firm adds that NEM believes shareholders appreciate its predictability, discipline and defining growth based on free cash flow rather than production.
The previously hot gold miners had a tough time of it in August, even slipping into bear market territory yesterday. But the names are hot again to start off September, with the GDX higher by 3.5% today. Gold is up 0.4% to $1,317 per ounce.
S&P, meanwhile, is mulling the possibility of dividend hikes, noting shareholder pressure is likely to lead to higher payouts or share buybacks should gold prices remain near or above current levels. Newmont Mining (NEM +2.6%) has promised to revisit its capital return strategy, Gold Fields (GFI +5.3%) significantly hiked its interim dividend, and AngloGold Ashanti (AU +2.3%) is considering resuming dividends in 2017 after a three-year holiday.