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How Are Businesses Encashing the Gold Bonanza?

  • November 25, 2020 12:00 AM AEDT
  • Hina Chowdhary
    Director, Equities Research Hina Chowdhary
    1424 Posts

    Hina Chowdhary is the Director, Equity Research at Kalkine and has an extensive experience of about 15 years in the area of Research, which includes 5+ years in Equities Research particularly.She has earned a Master of Science degree from the renowne...

How Are Businesses Encashing the Gold Bonanza?

Summary

  • Gold has been the darling commodity of the year 2020 with its price vaulting a record high of USD 2,073.41 per ounce.
  • The surge in gold prices and demand along with supply disruptions have set off many opportunities for gold traders and stakeholders across the globe.
  • As per many industry experts, the rally in gold spot has been ushering in a robust revenue stream for many traders of the precious metal.
  • The gold rally of 2020 has unlocked opportunities for gold-related businesses with many gold royalty funds now planning to tap the market to raise capital.
Gold MTF non-AMP

Gold has been quite the charmer as a safe haven asset in 2020 with the spot price vaulting to a record high of USD 2,073.41 per ounce in August 2020. The impeccable rally in gold prices has brought a smile on many faces with several banks, royalty funds and ETFs capitalising on the bumper benefits of the gold bonanza.

Also Read: Is the Gold Price Ready to Move Out of Shadows?

Revenue and Profit Simmering for Gold Traders Over Supply Anomalies

Many industry experts anticipate that the rally in gold spot has been simmering a robust revenue stream for many traders of the precious metal, including banks, royalty funds and gold-backed ETFs. They are expected to witness bumper profits over price anomalies created by a sudden demand splash and supply disruptions.

To Know More, Do Read: Gold Supply Disruptions and Paradigm Shift in Gold Miners’ Business Strategy

The surge in gold prices and demand along with supply disruptions has opened many opportunities for gold traders and stakeholders across the globe.

For example, the travel restrictions in March 2020 by many nations to curb the COVID-19 spread led to a supply lag, which in turn resulted in many arbitrage opportunities for global gold traders.

In March 2020, the price of gold in New York traded ~ USD 70 per ounce higher as compared to the gold price in London, a gap wide enough for arbitragers to act on.

Likewise, many such disparities have been seen across the globe, leading to a bonanza for gold traders who could promptly act upon the presented opportunity by the spike in gold demand and supply disruption.

Furthermore, many banks which could store gold to back exchange-traded funds, have witnessed a revenue generation from a spike in purchase from gold-backed ETFs across the globe. As per the recent data from the World Gold Council (WGC), over USD 60 billion has been invested in gold-backed ETFs across the globe, this year alone.

Apart from providing an opportunity to build on revenue and profit for many gold traders, the gold rally of 2020 is also unlocking doors for many gold-related businesses with many gold royalty funds now planning to tap the market to raise capital in the wake of a surge in market sentiments around gold.

Royalty Funds Tapping the Market for Capital Over Gold Rush

At present, higher revenue for gold producers, banks, royalty funds, gold-backed ETFs and others is attracting a major reinvestment rush in the gold mining industry, prompting many funds far in the corners to take the centre stage.

In the recent past, Africa’s largest gold producing state Ghana planned to list up to USD 500 million of its gold royalty fund in London in October 2020. The move was designed to take advantage of the precious metals’ strong performance in order to raise USD 400 to USD 500 million from the IPO. However, the listing was later suspended over concerns raised by the main opposition party about transparency and governance.  

Likewise, a similar flow of sentiment could be seen around North America, where Wheaton Precious Metals Corp, one of the largest Canadian precious metals streaming company, is also planning to tap the British bourses.

The Toronto Stock Exchange and New York Stock Exchange-listed Wheatstone recently announced its intention to seek the listing of its shares on the London Stock Exchange.

The listing on the British bourse is part of the Company’s growth strategy. It believes that listing on the London Stock Exchange would enhance access to the pools of equity capital available across the UK and many crucial financial centres in the Europe, Middle East, and Africa (or EMEA) region.

In a nutshell, the gold rally of 2020 has brought forward many changes for gold traders and gold-related business models with many now coming out of the dark into the limelight over the rush in the gold spot price.

Likewise, supply disruptions have been a key supporting factor to the gold rally, delivering an arbitrage opportunity to many gold traders, which now industry experts anticipate, have established a robust financial position.  

 


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