AXMIN Inc (TSXV: AXM)
AXMIN Inc. (TSXV:AXM) is a Canadian-based exploration and development company with a strong focus on central and West Africa.
On Tuesday, spurred by strong buying pressure and geopolitical risks, the price of gold achieved a historic high for the eighth consecutive trading day. The upward momentum in gold prices continued, with spot gold reaching as high as $2364.96 per ounce during intra-day trading, while the price of U.S. gold futures surged even further to touch $2379.70.
Since mid-February, the price of gold has risen by over 18%.
The World Gold Council (WGC) recently highlighted the fundamental factors supporting this surge in gold prices, including ongoing geopolitical risks, steady central bank purchases of gold for reserves, and the sustained demand for jewelry, gold bars, and coins in the market. However, gold ETFs have missed out on this rally, resulting in under-allocation at present.
Nevertheless, the recent increase in gold prices also presents some perplexing aspects, notably the lack of a clear trigger, especially given the current market uncertainty regarding the next moves by the Federal Reserve. Data from the CME Group indicates a 53% probability of a rate cut in June, signaling diminishing expectations of a Fed rate reduction. However, gold bulls have completely overlooked the Fed, while investor’s fear of missing out (FOMO) has become increasingly intense.
Recently, Jamie Dimon, Chairman and CEO of JPMorgan Chase, warned the market that U.S. inflation and interest rates could remain higher than market expectations. Over the next few years, U.S. interest rates could potentially rise to 8%.
Michael Widmer, Commodity Strategist at Bank of America, stated that despite global central banks tightening monetary policies in recent months, the resilience of gold prices has been remarkable. Consequently, once the Fed initiates rate cuts, investors are expected to re-enter the market, combined with strong central bank demand for gold, leading to an anticipated gold price increase to $3000 by 2025.
Speaking of central bank gold purchases, the People’s Bank of China has played a crucial role in supporting the gold market, acquiring over 200 tons of gold in 2023 alone. As of the end of March, China’s gold reserves stood at 72.74 million ounces, marking the 17th consecutive month of accumulation. The central bank’s gold acquisitions primarily reflect concerns about the U.S. dollar and apprehensions regarding a U.S. credit collapse. Following this logic, central banks may continue to increase their gold holdings.
The recent surge in gold cannot be attributed to traditional factors alone. Market sentiment, bolstered by geopolitical risks, is propelling gold prices. During times of frequent risk events, gold as a safe-haven asset becomes a staple asset held by various institutions, leading to a continuous increase in the premium on gold, ultimately creating a situation where prices rise easily but are resistant to decline.
