Bull Market Producers with Record High Gold Prices Commodity Discovery Fund 1,351 followers August 27, 2024
Market developments Gold After gold rose from $2,000 per ounce in February to $2,450 in May, we saw a slight correction around the Commodity
Update at the end of June. In the following days, gold briefly fell below $2,300, but it soon became apparent that the low was there and the precious
metal shot up again. Gold is now at a record level above $2,500 per ounce (โฌ72,000 per kilo).
The rise in gold parallels the falling value of the dollar. The dollar index (DXY) has fallen more than 5% since the end of June.
This is due to expectations surrounding the US policy rate. Fed Chairman Powell announced interest rate cuts, with the first likely in September.
Inflation is now said to be sufficiently under control that the Fed can try to support the labor market with interest rate cuts.
The other drivers of the gold price are central bank purchases and escalations in the Middle East. Central banks' demand for gold rose again to record highs in the second quarter of 2024.
And meanwhile, Israeli military actions against leaders of Hamas and Hezbollah threaten to spark a much larger war in that region. Gold mining producers immediately benefited from the rising gold price.
For example, the HUI and GDX (gold mining indices) have already risen +20% since June. However, the Canadian exploration stock exchange (CDNX), which comprises a large
part of the fund's portfolio, is still at the same level as two months ago.
The reason: exploration shares will only follow at a later stage. For example, the HUI is up +64% since the bottom in February, but the CDNX is only +8%.
However, recovery for the junior miners seems to be coming soon, and then it usually happens quickly. For example, a strong recovery in 2016 and 2020 previously
yielded gross returns of +70% and +85%. Silver Silver has not yet set new highs after the high at the end of May ($32.50 per ounce). In fact, poor
man's gold is still correcting, although it is bouncing up and down hard. For example, silver fell -17% during the summer holidays, and then the correction was
almost completely canceled out. With a silver price around $30, we are waiting for a breakout from the downward trend and then new highs towards $35 per ounce.
Moreover, India plays a crucial role in the price development of silver. In addition to the traditional demand for jewelry, investments in silver are also increasing.
Not only because of the intended undervaluation, but also because of a reduction in the import tax on silver from 15% to 6% in the fight against smuggling.
Copper
Copper shows a similar graph to silver. This essential base metal also topped at the end of May, although unlike silver this happened at an all-time high ($11,400 per tonne). And the copper price also subsequently experienced a sharp correction. The metal price is about -17% lower than the high, but this downtrend now appears to be largely behind us. This means that the shares are currently showing growth again. For example, the COPX is breaking out of the downtrend of the past three months, thanks to new rebounds in large holdings such as First Quantum, Teck Resources and Ivanhoe Mines. Furthermore, the fund fully benefited from the acquisition of Filo Mining by BHP and Lundin Mining. The fund has already earned more than โฌ2 million from this. Fundamentally, little has changed in the copper field. A new study from S&P Global on the largest copper discoveries shows that new discoveries are few and far smaller than in recent decades. Moreover, financing and permitting is much more difficult, making the entire process from discovery to production much longer. While this took about thirteen years two decades ago, today it takes an average of eighteen years. This development has a major impact on supply and is one of the causes of the increasing shortages. While shortages will occur with refined copper in three years' time, this is already happening with copper concentrate. S&P Global expects mine production to peak in five years and, partly as a result, the concentrate shortage to rise to as much as 2.2 million tonnes in 2032.
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