News - Prospector's Diary

Volatility ruled financial markets this week with gold’s roller-coaster ride a perfect example of what to expect for the rest of the year.

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Gold’s overdue price correction hit the wallets of investors this week and bruised a few egos, but while that predictable event was occurring something more remarkable was happening in iron ore

Gold’s overdue price correction hit the wallets of investors this week and bruised a few egos, but while that predictable event was occurring something more remarkable was happening in iron ore, where a seven-year boom might have started. The 9.3% fall in gold from a peak $US2068 an ounce last week to a low of $US1875/oz on Wednesday has been blamed on multiple factors, ranging from Russia’s claim to have developed a successful Covid-19 vaccine, to signs of an improvement in the U.S. economy, which could point to a stronger U.S. dollar.

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The bulls ran wild this week, driving gold and iron ore to fresh highs while trampling on anyone with a bearish view such as that aired last week by Macquarie Bank, which warned that the gold price was looking stretched.

The bulls ran wild this week, driving gold and iron ore to fresh highs while trampling on anyone with a bearish view such as that aired last week by Macquarie Bank, which warned that the gold price was looking stretched. FOMO (fear of missing out) has become an important factor (if not THE factor) in what’s happening as less experienced traders are drawn into commodity markets, though there are genuine reasons for supporting an argument that the market might be stronger for longer.

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Profit-takers dictated activity in the red-hot gold sector this week as the first warning bell was rung about “stretched” share prices, even as the underlying metal built on its record run and reached out towards the magic mark of $US2000 an ounce.

Profit-takers dictated activity in the red-hot gold sector this week as the first warning bell was rung about “stretched” share prices, even as the underlying metal built on its record run and reached out towards the magic mark of $US2000 an ounce. Macquarie Bank, the biggest gold bull in the Australian financial sector, warned that gold had entered “overshoot” territory after its 16.5% rise in seven weeks, from $US1680/oz on June 5 to its latest price of $US1958/oz, which is down slightly on the record $US1981/oz reached on Tuesday.

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Silver, the poor-man’s gold, set the pace this week as investors accelerated their flight to safety

Silver, the poor-man’s gold, set the pace this week as investors accelerated their flight to safety, driven by concern about Covid-19’s ongoing economic damage and the potential for a powerful return of inflation, which can damage the value of financial assets such as cash. Since the middle of last month, silver has risen by 35% to $US23.14 an ounce, easily outstripping gold’s 9% rise over the same time to a nine-year high of $US1868/oz as the value of the US dollar continued to slide and some US interest rates went deeper into negative territory.

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A flood of cash and a hotly contested takeover were the highlights of a week which saw a significant shift in market action with more happening in boardrooms than in the field

A flood of cash and a hotly contested takeover were the highlights of a week which saw a significant shift in market action with more happening in boardrooms than in the field as prices for gold and iron ore headed for the ceiling, and beyond. Cardinal Resources, an Australian company operating in West Africa, has emerged as a target of competing bids from Chinese and Russian goldmining companies.

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Gold starred this week as it powered through the $US1800 an ounce price-ceiling, but it wasn’t alone.

Gold starred this week as it powered through the $US1800 an ounce price-ceiling, but it wasn’t alone. Copper and nickel marched higher, and that could mean that something more significant than a gold boom is underway. The forces driving gold, perhaps to a record high of more than $US2000/oz, are well understood: economic and political uncertainty flavoured with fear of an outbreak of double-digit inflation.

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No prize for guessing that gold was the top performing commodity in the first six months of 2020

No prize for guessing that gold was the top performing commodity in the first six months of 2020, up 17%, but there might be more to gain from picking the next winner and while it’s a long shot, there were more hints this week of a lithium revival. The rush into gold saw it reach $US1790 an ounce on Monday (with futures reaching $US1800/oz) before profit-takers moved in, providing a double-barreled lesson for investors, with the first being that events in the US are the key to the gold price and that the higher a commodity rises, the more sellers it attracts.

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