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.
All investments follow certain patterns, like a script that actors hold. Gold investment is no exception. However, the market is always unpredictable, and the factors driving gold prices are constantly changing. The old paradigm of gold investment is no longer effective, and past certainties are fading away. The trends in the gold market since 2024 have proven this.
At this juncture, if you stick to the old script, you won’t be able to understand the current gold market.
In March 2024, Rob McEwen, the Chairman of the Board and the largest shareholder (holding 17% of shares) of McEwen Mining(MUX), a gold producer, mentioned in an interview with METALS 100 that the successful breakthrough of gold prices above the significant $2,000 mark has attracted more investment attention to this market. The value of high-quality gold exploration projects is expected to be re-evaluated. McEwen Mining operates four producing mines located in Nevada, Ontario, Mexico, and Argentina.
Firstly, traditional correlations are dissolving. In recent quarters, the strong negative correlation between gold prices and U.S. real interest rates, as well as the strong positive correlation with Western investor demand, has disappeared. According to the old pattern, with central banks aggressively hiking rates, the Western world entering a high-interest-rate environment, and real interest rates rising sharply, gold prices should have declined. However, the reality is that gold prices have frequently hit new highs.
At the same time, when gold prices hit new highs, gold ETFs should have recorded record inflows, but surprisingly, there was a massive outflow of funds. Between April 2022 and June 2024, gold ETFs saw a net inflow of nearly 780 tons of gold. From this, we can conclude that Western financial investors are no longer the marginal buyers or sellers of gold; strong demand from central banks and Asian private investors has become the main driver of rising gold prices.
When observing the gold market, the East is becoming increasingly important. The marginal participants in the gold market are shifting from the West to the East. In 2023, China, India, and the Middle East accounted for almost two-thirds of global gold jewelry demand, and nearly half of the demand for bars and coins, totaling around 1,200 tons, also came from these three regions.
Additionally, the demand from central banks has significantly increased, setting a new record of over 1,000 tons in 2022, and remaining at high levels in 2023. More importantly, this trend is expected to continue. A survey by the World Gold Council (WGC) shows that 70 central banks anticipate their gold reserves will continue to grow.
