Aussie Gold miners are up today.
Why are ASX gold miners up?
Gold prices got a boost yesterday on concerns over supply.
‘The gold market in New York is facing a historic squeeze as the global pandemic chokes off physical trading routes at the same time that investors are piling into the metal as a safe haven.
‘At issue is whether there will be enough gold available in New York to deliver against futures contracts traded on the Comex in the city with metals refiners shutting and efforts to contain the virus halting planes.[…]
‘Gold futures for June delivery climbed as much as 7.7% to $1,693.50 an ounce in New York on Tuesday and at their peak had a $67.57 premium over spot prices in London.’
According to Kitco News, in the last few days several miners have been forced to close mines as countries have been putting their citizens into a lockdown.
This has hit mines in South Africa and Canada. The largest gold mining company in the world, Newmont Corporation [NYSE:NEM], has announced it will be putting four mines on care and maintenance.
At the same time, central banks are bringing out the big guns in an effort to fight the virus.
The US Federal Reserve is restarting its bond purchasing program to increase liquidity in the system. The Fed has also this month lowered rates to a record low of 0.25%. There are concerns that this could bring inflation, along with supply chain disruptions.
All of this uncertainty, money printing, and low interest rates are good for gold
One of the main criticisms for gold is that it has no yield.
But, at a time of interest rates at close to zero and markets crashing, gold is definitely becoming more appealing.
For Australia, with the dollar depreciating against the US dollar, gold has seen some substantial gains.
As you can see below, gold prices in Australian dollars have jumped by close to 25% since the beginning of the year, while the increase in US dollars has instead hit 7.13% for the same time frame.
Nobody knows how all of this will play out or how long this pandemic will last.
Yet it’s likely that these trends will continue, especially if central banks continue to print money.
Check out The Rum Rebellion’s editor Greg Canavan’s recent interview with author and gold expert, Jim Rickards, where Jim explains why he expects gold prices could hit US$10,000 in the next years.
for The Rum Rebellion