Gold glistens but producers remain poor

The lustre of gold is failing producers. While the precious metal hit an all-time high of US$2232.75 (A$3,429.72) recently, share prices for majors and juniors alike are stuck in the mud. The price was buoyed by central banks, including China, buying gold as a store of value, Minelilfe founding director Gavin Wendt said. Lumped in the same basket At the same time, the share price of gold juniors was hamstrung by a lack of differentiation from other smallcaps, Mr Wendt said. “In the case of the gold juniors, they're unfortunately just lumped in the same basket as junior equities right across the resource sector. And it's fair to say that I think the junior equity, the junior end of the resource market is struggling. MineLife Founding Director Gavin Wendt “It's tough times at the moment. It has been for the last 12 months, probably 18 months. There's not a lot of investor interest across the board. I think most small companies are doing it tough. “And that's to do with the fact that investors generally, I think are a little bit lukewarm on the resource sector over the last 12 months, they've probably taken money out of the big stocks and gradually that cascades all the way down.” According to Bank of America, China boosted its imports of gold for non-monetary use by 51 percent to 367 tons during the months of January and February, Mr Wendt said. To put that number into context, the global annual physical gold market is usually around 4000 tonnes. The influence of central banks It was the biggest driver behind the price increase to the extent that it diminished the effect of other influences. “Central banks are still buying gold in record volumes and investors are looking at the impact that central banks are having on the gold price and they're looking at the rationale of central banks, well, why are central banks buying?" Mr Wendt said. “’They must be buying for a sound reason. So why shouldn't we buy gold as well’? “And if it's going to result in a very, very strong price action, well let's get amongst it. So I think those are the key factors that are sort of driving gold at the moment.” The same market forces would be visited on silver, Mr Wendt said. “Where gold goes, silver typically follows, so it's interesting to look at what's happening in the silver space," he said. “The Silver Institute notes that the physical silver market has been in a deficit position for the last two years - with another deficit forecast for 2024. Silver had been lagging gold earlier this year, but in the last month it's gained by 9.44 percent, while gold is up 8.55 percent. “Silver is likely to be well supported with expanding solar cell production.”

Gold glistens but producers remain poor

Industry Queensland

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