Gold SWOT: Gold Reached a New All-Time High. What’s Next?

Strengths

• The best performing precious metal for the week was platinum, up 9.00%, and breaking through $1,000 per ounce. Gold exports to the U.S. from Europe’s main refining hub in Switzerland jumped to the highest since Russia’s invasion of Ukraine, as traders scrambled to bring bullion ashore ahead of potential tariffs. Switzerland shipped 64.2 tons of gold to the U.S. in December, the most since March 2022, according to Bloomberg. Traders are considering that a tariff on gold could lift domestic gold prices. In other news, gold reached a new all-time high this week, due to a weaker dollar and haven demand.

• The gold market has launched a digital database to track bullion and keep precious metals from illicit sources out of the market. The Gold Bar Integrity Database, developed by the London Bullion Market Association, will trace precious metals to prevent supply from criminal gangs or conflict zones ending up in bank vaults. It will also seek to stop counterfeit bars stamped with the logos of major refineries from entering the market, as occurred in previous years, according to Bloomberg.
• Allied Gold has demonstrated strong operational performance in the fourth quarter of 2024, achieving record quarterly production of 99,632 ounces of gold, with significant contributions from the Sadiola mine's Korali oxide ore. Despite a slight increase in AISC to US$1,780/oz, the company maintains a robust financial position with pro-form cash balances exceeding $340 million after year-end gold sales. Allied Gold continues to progress on its growth projects, including the Kurmuk development and Sadiola expansion, which are on time and budget, positioning the company for substantial production increases in the coming years.

Weaknesses

• The worst performing precious metal for the week was gold, but still up 0.84%. With the palladium market comfortably supplied, there have been concerns that Norilsk Nickel, the lowest cost supplier, might maximize production, squeezing its peers especially in South Africa. That said, updating its guidance, the company noted: “The palladium production forecast assumes a slight decline in output in 2025, averaging just over 1%, to 2.704-2.756 million ounces, compared to 2.762 million ounces produced the previous year.”
• Eldorado ELD released a technical report for the Lamaque Complex that was slightly negative to BMO’s valuation. This technical report saw the Lamaque complex having a shorter mine life, lower production, and increased costs compared with their prior estimates
• Gold declined as traders sold the precious metal to cover losses in equities amid a global rout in technology stocks. The stock markets from New York to London to Tokyo got hammered on concern that a cheaper artificial intelligence-model from Chinese startup Deep Seek could threaten the dominance of U.S. technology, according to Bloomberg.

Opportunities

• Newmont Corporation announced that it has agreed to sell its Porcupine operation in Ontario, Canada to Discovery Silver Corp. for up to $425 million in total consideration. The transaction is expected to close in the first half of 2025, subject to certain conditions being satisfied. Franco Nevada announced a $450 million financing package with Discovery Silver for the takeover. Franco will be providing Discovery funding through a $300 million royalty, a $100 million senior secured loan, and $49 million in equity for the operator's acquisition.
• Gold has shown strong performance recently, rising 6.2% in U.S. dollar terms, 10.8% in AUD, and 9.4% in CAD over the past two months, while gold producers tracked by indices have fallen in the same period. This divergence between the commodity and producer performance presents an opportunity for gold companies, especially those operating in CAD and AUD and selling in USD, to potentially improve their profitability. As the gold price continues to rise faster than production costs, these companies are poised to benefit from expanding margins, which could lead to improved financial performance and potentially bridge the gap between the commodity's appreciation and the current underperformance of gold producers.
• Raphael Lamm and Mark Landau, founders of Melbourne hedge fund L1 Capital, told investors that Trump could spur gold prices higher, despite a bull run in the precious metal outpacing all other major asset classes last year. “If we look at the fundamental drivers for gold – and there’s a long laundry list of them – the key one in our mind is the U.S. debt position,” Paragon CIO John Deniz told investors on a call this month, as reported by Bloomberg.

Threats

• Rwanda has been urged to withdraw its advancing troops from the outskirts of Goma, a mineral-rich city in the Democratic Republic of Congo (DRC).  The Rwanda-backed M23 rebels have made rapid advances through the lucrative but conflict-ravaged eastern borderlands, killing at least 13 peacekeepers, forcing thousands of civilians to flee and grounding flights, according to the Telegraph.
• Botswana’s president Duma Boko, who swept to power in October elections, said his government has reached a diamond extraction and sales agreement with De Beers that will bring certainty to the gem-dependent economy.  Terms were finalized by midnight on Jan. 24 and will be announced soon, Boko said in an interview on Tuesday. Revenue from diamond sales from Botswana have dropped 46% year-over-year and is at threat of disappearing with cheaper lab grown diamonds.

A surge in gold shipments to the U.S. has led to a shortage of bullion in London, as traders amass an $82 billion stockpile in New York over fears of Trump administration tariffs. The wait to withdraw bullion stored in the Bank of England’s vaults has risen from a few days to between four and eight weeks, according to people familiar with the process, as the central bank struggles to keep up with demand. “People can’t get their hands on gold because so much has been shipped to New York, and the rest is stuck in the queue,” said one industry executive.

********