Gold Stalled After Extending Gains Amid A Slight Recovery In The Dollar

  • Mar 26, 2019 AEDT
  • Team Kalkine
Gold Stalled After Extending Gains Amid A Slight Recovery In The Dollar

Gold prices (XAU) stalled after hitting the level of $1324.57 (Day’s high on 25th March 2019). The prices rose amid the uncertainty over the global economic conditions and fear of no-deal Brexit from the level of $1280.93(Day’s low on 7th March).

The gains over the indication of possible U.S. recession and dovish stance of the U.S. Federal Reserve finally stalled, and gold prices fell to the present level of $1316.

The dollar prices (DXY) recovered after hitting the level of 96.41 (Day’s low on 25th March) to the present level of 96.58, which in turn capped the extended rally in gold prices.

However, the gain in dollar index was not significant to ignite any downside in gold prices. The dovish stance of FED chair Jerome Powell along with the rest of the FED members prevented any sharp upside in dollar prices.

The U.S-10-year bond yield recovered slightly after breaching the previous year low of 2.416% (January 2018) and exerted slight pressure on gold prices. However, market participants are waiting for any significant event to take place in the global market along with economic data such as the U.S. building permits to further depict the gold movement.

Gold miners on the Australian Stock Exchange remained in positive territory in the absence of any significant drop in the gold prices.

St Barbara (ASX: SBM) inched up to mark a high of A$3.530, before closing on a positive note at A$3.520, up by 6.02% as compared to its previous close. The shares of the company remained in the positive zone throughout the trading session. The share prices which dropped significantly on 22nd March 2019, marked its second positive close for the week as compared to the closing price on 22nd March (Friday).

Regis Resources (ASX: RRL) followed the same trajectory and marked a high of A$5.440, before ending the day session at A$5.410, up by 2.46% as compared to its previous close.

Various other Gold miners such as Evolution, Dacian also ended the day on a positive note, and the former closed at A$3.760, up by 0.53% as compared to its previous close while the latter closed at A$2.280, up by 0.44% as compared to its previous close.

In the present scenario, the gold miners are trying to ramp up the production activities to take advantage of high gold prices. The high gold prices help gold miners on many fronts such as hedging, locking in the stream of future cash flows.

To take advantage of high gold prices, the miners must either replenish the mined ores, which could be possible through the extensive exploration activities or must replace the ore reserve with a high grade. To replace the ores reserve with high grade, the gold miners must either acquire the quality projects, which requires significant cash in hand or tap those quality projects through Joint ventures.

The companies with a strong balance sheet and cash reserve can take advantage of high gold prices through either acquisition of quality projects or expanding exploration programs.


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