After about three years of going nowhere, gold is again a commodity and some observers predict that the rally is just going.
Since you beat a record high in late 2011, just shy of US $ 1,900 a ounce, gold has largely been out of favor among investors. As recently as last August, precious metals traded at USD 1,170, almost 40 percent below its peak.
But last week, gold futures hit a six-year high, driven by expectations of interest rate cuts and a weaker US dollar. Over the past month alone, gold has jumped 1[ads1]0 percent, catapulting to more than US $ 1400 a ounce.
traditionally seen as a safe-haven investment that increases in value during periods of market turbulence, gold has recently benefited from international political uncertainty. US President Donald Trump recently threatened Iran with "extinction", not long after it shot down an American military drone.
"We have completed a multi-year bear market, and I think we are on the way to a multi-year beef market," said Dennis Gartman, editor and publisher of daily market note. The Gartman Letter.
"A year from now, gold will be significantly higher. Maybe $ 100, $ 200, $ 300 per ounce higher than it is now."
Mr. Gartman's bullishness stems from the extremely low global interest rate environment and the continued depreciation of the US dollar compared to major world currencies.
In recent weeks, the US Federal Reserve has become increasingly tough, with economists expecting at least 25 basis-point cuts in their daily lending rates later this month. Lower prices generally put pressure on US dollars; Since gold is priced in dollars, it tends to rise in value when the dollar falls.
The story also suggests that gold may have much upward.
"Gold tends to work even better after the first cut of a relief cycle," said Daniel Ghali, trading strategist at TD Securities Inc.
"We expect this to be just the beginning of what will be stronger yellow performance in the coming months."
TD expects three declines in the Federal Reserve rate of a total of 75 basis points by the end of the year, and the bank expects gold to hit US $ 1485 per ounce for the next six months.
An even higher gold price could stimulate further mergers and acquisitions in the gold industry. Having been in a deep freeze for the past seven years, the world's two largest gold miners hit thousands of dollars in the past nine months, with Newmont Mining Inc. (now Newmont Goldcorp Corp.), which acquired Goldcorp Inc. and Barrick Gold Corp.. Buyer Randgold Resources Ltd.
While veteran gold analyst John Ing with Maison Placements Canada Inc. does not see any such big megadots immediately, he says that a number of smaller deals are possible, with buyers possibly stepping up to buy mines "where the higher gold price skates some of these projects [onside] and making them a little more attractive from a cash flow perspective. "
Mr Ing says he would not be surprised to see Vancouver-based Pan American Silver Corp during the year, as part of the acquisition of Tahoe Resources Inc., arrested Pan American Bell Creek and Timmins West mines. Pan American considers the assets non-core and said it is willing to sell both properties. Mr. Ing says the sale of the mines could raise up to $ 300 million. In an email to The Globe and Mail, pan-American spokesman Siren Fisekci said the company is engaged in an "active sales process", but refused to elaborate on discussions with potential buyers.
In the case of miners who can pull the trigger on the acquisition to take advantage of the higher gold price, Mr. Ing designated Toronto-based Kirkland Lake Gold Ltd. An acquisition of Kirkland Lake could address its relatively low reserve base, he said, and with stock exchange trading at a premium compared to his peers, the company is well positioned to be an "aggressive buyer."
Spokeswoman Kirkland Lake, Joanne Kearney, said in an email to The Globe that its main Priority is expanding its existing business, but it also plans to invest in "high quality new gold projects" ".
Your time is valuable. Get the top quality headlines newsletter handy to your inbox in the morning or evening. Sign up today .