Macro Intelligence: unlocking golden opportunities and charting the rise, risks and rewards of gold's $2000 surge

Article written by Juliette Saly (ausbiz)

Mining for momentum: gold's glittering surge

In this week’s edition of IG Macro Intelligence, we take a look at the momentum in gold and its impact on market sentiment as gold has recently broken through $2000 an ounce and continues to gather bullish momentum.

Spot gold four hour chart

The gold price has been gaining against a weaker US dollar as traders bet the Federal Reserve is done with its rate-hiking cycle.

This has sent bond yields lower. However, as this Bloomberg chart shows, 10-year treasury yields are struggling to extend declines below 4.5% as concerns over policy and burgeoning supply weigh on investors' minds.

A steady decline in US bond yields could see the rally in gold gather momentum and some traders predict gold prices could reach fresh records.

Golden forecasts: expert predictions and resistance levels

IG’s Tony Sycamore mentioned on ausbiz recently that unless gold breaks through the recent resistance level around $2010 an ounce, there could be a rotation back towards $1930-1950 an ounce. But, if gold can hold above $2010, Tony sees range highs around $2070 tested.

Barry Dawes from Martin Place Securities told ausbiz he sees gold on a power move, which could test all-time highs above $2080 reached earlier this year.

Vivek Dhar, Commodities Strategist at the Commonwealth Bank, points out that the recent rally depends on the reduction of the Fed Funds rate in 2024, as markets price in a cut from June.

Vivek told ausbiz gold is trading above its actual value due to the market’s bullish view on rate cuts and believes $1950 an ounce is fair value. However, he conceded the precious metal could hold a rally above $2000 if the US dollar aligns with more aggressive rate cuts.

Technical analyst Mark Newton from Fundstrat wrote in a recent note that he sees gold eventually breaching $2500 given falling real rates, rising cycles, and ongoing political conflict. But, he added this is an intermediate, not a short-term target.

Spot gold weekly chart

As good as sold? Navigating safe-haven investments

Gold has always been seen as a safe-haven store of value. The precious metal can act as both a hedge against inflationary and deflationary pressures and is seen as a good diversification in any portfolio.

Gold is also viewed as a traditional store of value, which can provide financial protection in times of geopolitical and macroeconomic uncertainty. More importantly, it’s seen as low risk and a long-term investment. However, with the advent of assets like cryptocurrencies, some crypto bulls are touting Bitcoin as a safer bet.

Bitcoin vs. gold: the precious debate

Ark’s Cathie Wood has famously claimed she sees Bitcoin as a “digital gold” and would prefer to own it over cash or gold over a 10-year period.

The Ark Investment Manager told Bloomberg recently there is no “counterparty risk” to holding Bitcoin, which she sees as a hedge against inflationary and deflationary pressures. Yet Bitcoin’s 64% crash in 2022 during the biggest rise in consumer inflation in 40 years means many gold bugs are skeptical about its role as an inflationary hedge.

Ben Simpson, CEO of Collective Shift, agrees with Cathie Wood. This year, Bitcoin’s price has rebounded around 110% as traders bet the US Securities and Exchange Commission may soon approve ETFs that invest directly in the coin.

Ben told me recently on ausbiz, he believes Bitcoin is superior to gold as a safe-haven asset. “If you have $10,000 worth of gold and you try to take that to the US on the plane…. they won’t let you through,” he told me, adding that Bitcoin is carried on a digital wallet so can be more easily transported and stored.

Bitcoin weekly chart

Gold rush on ASX: stock outlook and expert recommendations

“A sea change is underway in gold sentiment,” says Barry Dawes from Martin Place Securities. He claims it’s time to aggressively add to your holdings, saying the charts are showing small gold stocks are now bottoming and turning higher.

• Newmont Mining

As for the bigger-name stocks, Newmont Mining, an American company, is the world’s largest gold mining corporation.

It’s listed on the ASX under the ticker code NEM following its recent acquisition of Newcrest Mining. It’s also the only gold stock listed on the US S&P 500.

It tanked on debut on the ASX due to falling gold prices, as weaker prices of the metal equate to a smaller profit margin for the miner. But recently it’s started to look alluring to brokers.

Macquarie has initiated its coverage of NEM as an “Outperform,” saying it is “by far the largest gold play on the ASX and provides a truly diversified, leveraged exposure to gold.” Macquarie’s target price for Newmont is $71, which is a 27% return on its current price excluding dividends.

Ord Minnett initiated their coverage with a “Buy” with a price target of $82.

Newmont Mining four hour chart

• Northern Star Resources

Of the brokerages who cover Northern Star, only Macquarie has an outperform with a price target of $15.

Norther Star Resources daily chart

Lustre or loss: the future of gold's outlook

Four of the six firms that cover Regis Resources favour the stock, while Citi has a Sell and UBS are Neutral.

Northern Star sentiment indicators

The outlook for any gold stock, of course, relies on whether or not the precious metal maintains or loses its recent lustre.

Evolution Mining sentiment indicators