Banyan Gold Corp. (TSXV: BYN, OTCQB: BYAGF)
The New Yukon Gold Rush
Due to the latest grim U.S. employment and economic data, coupled with heightened tensions in the Middle East, global investors’ pessimism has intensified, leading to a “Black Monday” for global stock markets this past week.
The Japanese stock market was the biggest loser in the Asia-Pacific markets, with the Nikkei 225 index plummeting by over 12% at one point, erasing all gains made since the beginning of 2024 in a single day.
Surprisingly, gold prices, known as a safe-haven asset, also declined along with the stock market. Industry experts suggest that the volatility in gold prices reflects market panic levels, prompting traders to close out profitable gold positions to cover margin calls in other assets. However, despite this, the safe-haven appeal of gold remains strong amidst escalating concerns about the U.S. economy.
Adrian Day, President of Adrian Day Asset Management, anticipates a further rise in gold prices next week, with the Federal Reserve’s expected rate cut in September sparking increased interest in gold among North American investors, especially if signs of economic downturn in the U.S. become more pronounced.
Ewa Manthey, a commodity strategist at ING, mentioned on Friday that gold prices are expected to peak in the fourth quarter, supported by inflows from ETFs and central bank purchases amid rate cuts by the Federal Reserve and geopolitical risks.
Despite Monday’s sharp gold price drop, Manthey notes that gold has risen by about 15% year-to-date, making it one of the top-performing commodities this year, thanks to central bank purchases, Asian demand, and expectations of Fed rate cuts. Strong demand from central banks and Asian consumers led to a historic high in gold prices in July.
Regarding China’s central bank not increasing gold reserves for the third consecutive month in July, Manthey highlighted that in 2023, central banks globally added 1037 tons of gold, the second-highest annual purchase amount in history, just behind the record-breaking 1082 tons in 2022. Despite the current economic and geopolitical tensions and the pullback from record highs, central bank demand is expected to remain strong in 2024.
Furthermore, according to data from the World Gold Council, after experiencing the strongest month since May 2023, global gold ETFs have seen inflows for two consecutive months. In June, significant buying in Europe and Asia offset outflows from North America.
Manthey believes that the Ukraine conflict, Middle East tensions, and U.S.-China relations indicate that safe-haven demand will continue to support gold prices in the short to medium term. The upcoming U.S. presidential election in November and the long-awaited Fed rate cuts are also expected to drive gold prices higher towards the year-end. Expectations of increased central bank purchases will further support gold prices.
ING forecasts an average spot gold price of $2380 in the third quarter, reaching a peak of $2450 per ounce in the fourth quarter, with an annual average price of $2301 per ounce.
