Gold SWOT: Silver Has Caught up and Outperformed Gold by 10% Since Mid-February

Strengths

• The best performing precious metal for the week was platinum, but still off 2.12%, on no specific news as all the precious metals pulled back after Middle East tensions eased, at least momentarily. Gold’s rise to all-time highs above $2,400 an ounce this year has captivated global markets. China, the world’s biggest producer and consumer of the precious metal, is front and center of the extraordinary ascent, according to Bloomberg.
• Newmont Corp. soared more than 12% on Thursday as it reported better-than-expected gold production, and more importantly, lower-than-expected production costs. Margin expansion versus compression from inflation in recent years was welcome news. Investors jumped into the stock. Ramelius Resources produced 86,900 ounces, up 27% this quarter, at AISC of A$1,344 per ounce, which were a 9% beat versus Canaccord consensus, and well below recently released guidance of A$1,375-1,475 per ounce.
• Solar demand for silver was up 63% year-over-year in 2023 and now accounts for over 16% of total demand (up from 5% in 2014). Higher solar demand is driving substantial silver deficits and helping to offset weaker investment demand. With mine supply flat, RBC sees potential for a higher price floor and a re-rate of silver versus gold.

Weaknesses

• The worst performing precious metal for the week was palladium, down 6.27%. China’s blistering roll-out of solar capacity slowed as grids struggled to build enough power lines and backup capacity. The country installed 45.7 gigawatts of photovoltaic panels in the first three months, up more than a third from a year earlier, the National Energy Administration said in a statement on Monday.
• Gold fell as geopolitical tensions eased in the Middle East, paring haven demand, and traders looked ahead to U.S. data that will shed light on the outlook for monetary policy. Bullion dropped after a five-week rally, the longest such streak in more than a year, according to Bloomberg.
• G Mining Ventures dropped as much as 18%, after it and Reunion Gold Corp. said they entered a pact to combine and create an intermediate gold producer. Reunion Gold shares jumped as much as 22% before paring the gain to 8%, according to Bloomberg. Reunion shareholders will receive 0.285 of a G Mining shares per Reunion share plus ownership in a SpinCo at a value of $15 million. This results in a 29% premium over the pre-deal price of C$0.50 per share, according to Stifel. 

Opportunities

• The week began with the G-Mining tie up of Reunion Gold. Then, mid-week, Equinox Gold Corp. consolidated the remaining 40% of its Greenstone project from Orion Mine Finance Management for $995 million and successfully raised $750 million in debt and $290 million in equity to fund the purchase. BHP Group Ltd. proposed buying Anglo American PLC for $39 billion, which they flatly rejected. Gaining control of Anglo American would put BHP in the position of supplying 10% of world copper. By the close of the week, Silvercorp Metals Inc. announced plans to buy Adventus Mining Corp for $200 million. To sum it up, companies are cleaning house on acquisitions while the retail speculative investor is still hoping for Bitcoin to go higher while Chinese retail buying is proving to be very resilient. 
• Silver has caught up and outperformed gold by 10% since mid-February, yet still at a gold/silver ratio over 80:1 and above the 10-year average. The 2020 ratio peak at 65:1 would equate to a silver price of over $37 per ounce, implying silver has room to move higher versus gold at current levels, according to RBC. 
• Gold’s ascent rests in no small part on central bank buying, especially from Asia and other emerging markets, writes Bloomberg. This demand is likely to continue throughout 2024 given the purchasing decisions are strategic. Bullion has plenty of high-profile Wall Street backers, and their outlook for a long series of gains will not have changed.

Threats

• Gold may have further downside to probe as it is still closer to overbought territory despite this week’s selloff. The precious metal surged 9% in the space of just 12 days since the start of April on haven demand, but with tensions in the Middle East easing, some of that money is being taken off the table, according to Bloomberg.
• Regis Resources reported third quarter gold production of 90,600 ounces at AISC A$2,735/ounce versus FactSet consensus of 93,000 ounces at AISC A$2,464/ounce. Regis Resources was downgraded to sell from neutral at UBS and the group cut the target to A$1.80 from A$2.15, which is 18% downside.
• Backers of Bitcoin appear to have a plan to get gold mining companies in on buying Bitcoin. On Friday, at Agnico Eagle’s annual meeting post management presentation, the floor was open for questions. The second question from one of the attendees was if management had a forecast for how high the Bitcoin price was going to go. No, the company did not have a forecast, they did not believe Bitcoin was a currency, etc. Management seemed to have put the issue to bed with that answer. The third question from another attendee was if management had considered buying Bitcoin and holding it as an asset on the company’s balance sheet. 

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