Gold primed to soar in 2016, and here’s why
The light at the end of the tunnel continues to stay lit for gold. Prices for the precious metal posted the biggest one-day gain in more than 14 months on Monday, rising 3.5 percent--and briefly above $1,200 an ounce--to close at $1,197.90. As global financial markets continue to tumble the trend for gold could easily skyrocket in 2016.
“A strong risk-off sentiment is feeding into the gold market,” said James Steel, chief precious-metal analyst at HSBC Securities (USA) Inc.
According to The Wall Street Journal, "a fall in the dollar against other major currencies, sharp losses in equity markets across the board and a continuous slide in oil prices have contributed to investor jitters about the unsteady economic conditions and weakening corporate earnings, pushing investors to plow money into gold."
George Gero, a precious-metal strategist at RBC Capital Markets, said “it’s the fear of the unknowns” that is driving the demand for gold.
"The drive for gold today is purely tied to the risk type of trade," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago. "People have to move their equities out of there, have to put (money) into safer assets."
The yellow metal, which has logged losses for three consecutive years, also has investors feeling bullish. Sushil Kedia, President of the Association of Technical Market Analysts (ATMA), believes gold prices will eventually double past $2,000 an ounce.
Other precious metals such as platinum, silver and palladium were also up. Prices for platinum rose 2.2 percent to $926.98, silver jumped 2.8 percent to $15.39 an ounce, and palladium reached $515.20 an ounce, up 2.9 percent.
Lynas revenue jumps 21% as rare earth prices jump
Australian miner Lynas Rare Earths posted a 20.6% rise in revenue in the March quarter as selling prices for the key metals it mines hit record highs amid strong demand, particularly for neodymium and praseodymium (NdPr).
NdPr is used in magnets for electric vehicles and windfarms, in consumer goods like smartphones, and in military equipment such as jet engines and missile guidance systems.
The company said it plans to maintain production at 75% however, as it seeks to continue to meet covid-19 safety protocols and grapples with shipping difficulties. Shares in Lynas fell 6.1% after the results.
“They have faced a few logistics issues, and it would be good to know when they are going to start lifting their utilisation rates a bit,” said portfolio manager Andy Forster of Argo Investments in Sydney.
“Pricing has been pretty strong although it may have peeled back a bit recently. I still think the medium, long-term outlook is pretty good for their suite of products.”
Lynas post ed revenue of A$110mn ($85.37mn) for the three months to the end of March, up from A$91.2mn a year earlier as prices soared.
It said its full product range garnered average selling prices of A$35.5/kg during the March quarter, up from $23.7 in the first half of the financial year. “While the persistence of the covid crisis, especially in Europe, calls for careful forecasts for our business ahead, we see the rare earth market recovering very quickly,” said Lynas, the world’s largest rare earths producer outside China.
Freight demand has spiked during the pandemic, while the blockage of the Suez Canal in March delayed a shipment to April.
Lynas’ output of 4,463 tonnes of rare earth oxide (REO) during the quarter was marginally lower than 4,465 tonnes from a year earlier.