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.
As the Federal Reserve’s September interest rate cut is almost a done deal, coupled with the escalation of geopolitical conflict in the Middle East, where Israeli forces attacked the southern suburbs of Lebanon’s capital Beirut on 30 July local time, traders have sought to buy the precious metal as a safe-haven, pushing gold prices to record their biggest daily gain in nearly two weeks on Tuesday.
The gold market is on the verge of a meaningful rally as demand for gold-backed exchange-traded funds begins to pick up, said Ryan McIntyre, managing partner at Sprott Inc. in an interview with Kitco News.
One good sign is that Western investment demand is starting to emerge again in the gold market. Strong Western institutional investor buying is a key catalyst before gold really takes off.
According to McIntyre, while the Fed’s impending interest rate cuts have made gold attractive by lowering the opportunity cost of the precious metal, there is still no real push for institutional investors to flood the gold market.
With real interest rates still at high levels, funds are making money by buying short-term money market funds, so there is little interest in gold. However, as the economic slowdown begins to put pressure on equity markets, a major shift in investment sentiment is expected.
Currently, valuations of the US stock market and many other asset classes are very high, and gold is one of the few tools available to help diversify portfolios, McIntyre added, adding that while the economy is still quite resilient, the government’s growing deficits are still the biggest threat, with the US debt hitting a record $35 trillion.
And growing deficits will have a greater long-term impact on precious metals, as it’s only a matter of time before the dollar faces a significant devaluation, which will underpin a long-term bull market in gold.
A survey by the World Gold Council (WGC) earlier this month showed that the price of gold hit a record high as Asian investors increased their demand for buying physical bullion in the over-the-counter market.
In addition, this year’s U.S. presidential election has also begun to stimulate Western investor interest in gold, with gold-backed exchange-traded fund positions increasing by about 44 tonnes in July, on track for the biggest monthly increase in more than two years.
