Rua Gold Inc. (TSXV: RUA, OTC: NZAUF, WKN: H8E)
An Emerging Gold Explorer with Two Highly Prospective Land Packages in New Zealand’s historical gold fields.
Although gold and silver prices experienced setbacks this week, analysts and institutional investors remain generally optimistic about the precious metals in the near term, as interest rate cuts on the agenda, and with the US jobs market likely to show signs of cooling.
Nitesh Shah, Head of European Commodities and Macroeconomic Research at WisdomTree, believes that exchange-traded product (ETP) investors who have been on the sidelines for some time are now starting to cheer for gold. He emphasises that Chinese investment demand for physical gold is the main reason for the precious metal’s strength over the past month.
Shah noted that Chinese gold ETPs have seen five consecutive months of inflows, with April attracting 9 billion yuan ($1.3 billion), the strongest month on record, pushing total assets under management (AUM) to a record high of 46 billion yuan ($6.4 billion). At the same time, gold holdings recorded their biggest monthly increase ever, rising by 17 tonnes to 84 tonnes.
Now North American investors may be joining in, Shah said. Some strong flows into U.S.-registered ETPs in recent weeks could indicate that outflows have reached a turning point. As for where precious metals prices will go next week, it generally depends on the news coming out next week.
Next Monday, the S&P Global Manufacturing PMI and the ISM Manufacturing PMI for May will be released. Then on Wednesday, the Bank of Canada will announce its interest rate decision, with economists predicting a 25 basis point cut. On Thursday morning, the European Central Bank will announce its interest rate decision, with markets expecting a 25 basis point cut in the benchmark rate. Then there will be the release of the May non-farm payrolls report on Friday morning.
If Canada and the ECB are as expected to announce a rate cut, coupled with the May jobs report disappointed the market, for the Fed’s monetary policy is expected to have a significant and substantial impact, is expected to constitute a favourable support for precious metal prices.
