Precious Metals Weekly Round-Up: Gold Climbs as US Dollar Slumps

Both gold and silver made gains early Friday morning (September 21) after the US dollar tumbled in response to a variety of ongoing geopolitical concerns.

As of 9:26 a.m. EST, the yellow metal was trading at US$ 1,192.10 per ounce after hitting a one-week high in the previous session. As for the white metal, it was trading at US$ 14.15 per ounce as of 19:29 a.m. EST.

Both gold and silver rose when the US dollar dipped on the back of calmed fears surrounding a Sino-US trade war, the looming threat of a potential interest hike during the Federal Reserve meeting next week and ongoing US and Chinese tariffs on reciprocal imports.

“America is killing itself with these trade tariffs. [They] actually hit America far harder than [they] hit China. The idea that the dollar is all mighty and going to continue to rise is not true,” said Alasdair Macleod, head of research at GoldMoney.com.

“Gold traders are sitting on short positions (but) if the dollar comes down another notch or two, shorts in gold will start to panic. When gold starts moving, it [could] start moving very sharply [higher],” he added.

As for silver, Christopher Lewis of FXEmpire stated, “[r]emember, the US dollar has a major part to play in the way the silver markets behave. Right now, there are a lot of concerns around the world, so that of course has people dumping precious metals over the longer-term.”

He added, “I think that will be one of the reason you should be paying attention to buying physical silver as it’s a great longer-term investment.”

For their part, platinum and palladium were up for the week but dipped during the Friday morning session. On Thursday (September 20), platinum reached its highest price since August 10 when it traded at US$ 835.20 per ounce, while palladium found prices not seen since April 19 when it traded at US$ 1,054 per ounce.

As of 9:44 a.m. platinum was trading at US$ 824 per ounce, while palladium landed at US$ 982 per ounce.

Precious metals top news stories

Our top precious metals stories this week featured Tahoe Resources (TSX:THO,NYSE:TAHO) being forced to lay off 169 employees at its flagship silver mine Escobal, Zimbabwe miner Metallon evaluating Zimbabwe’s current economic climate and looking at paying its mining equipment suppliers in gold and Sibanye-Stillwater (NYSE:SBGL,JSE:SGL) remaining committed to the acquisition of platinum miner Lonmin (LSE:LMI) despite a variety of conditions placed on the deal by a competition watchdog,

1. Tahoe Lays Off More Employees at Guatemalan Silver Mine

Tahoe Resources (TSX:THO,NYSE:TAHO) was forced to lay off 169 employees at Escobal, its flagship silver mine.

The move follows the early September news that Guatemala’s Constitutional Court has upheld the suspension of licenses at the mine.

With the new round of layoffs at Minera San Rafael, Tahoe’s local unit, the total number of employees currently out of work is 872. Layoffs began after the suspension was implemented. “The uncertainty in which the [Constitutional Court] has maintained the case compels us to adapt,” Andres Davila, a spokesperson for the mine, said in a statement.

2. Top Zimbabwe Miner May Pay Suppliers in Gold

Metallon evaluated Zimbabwe’s current economic climate and has begun looking at paying its mining equipment suppliers in gold.

Zimbabwe abandoned its currency in 2009 because of hyperinflation, and now faces a cash shortage.

Metallon, the country’s largest gold miner, requires US$ 400 million to buy new machinery and upgrade existing equipment as it moves to increase its production.

CEO Mzi Khumalo noted that the move would allow the company to sidestep the country’s cash quandary and continue with plans to expand.

“We can then enter agreements with banks, various financiers on the basis of gold-backed transactions,” Khumalo stated. He added, “[suppliers] will get their payment in gold.”

3. Sibanye-Lonmin Merger Still on Despite Competition Watchdog Conditions

Sibanye-Stillwater (NYSE:SBGL,JSE:SGL) reported that it remains committed to the acquisition of platinum miner Lonmin (LSE:LMI) despite a variety of conditions placed on the deal by a competition watchdog.

On Monday (September 17), the South African Competition Commission approved the all-share transaction on the basis that it will not prevent or lessen competition in the platinum-group metals (PGMs) markets.

It also made the decision to place conditions on the deal, stating that it raises public interest concerns.

Both companies have accepted the terms, with Neal Froneman, CEO of Sibanye-Stillwater, stating, “[t]he positive recommendation by the commission to the tribunal is pleasing and on terms which we believe are fair, reasonable and in the best interest of all stakeholders.”

Also in the news

Bloomberg reported that billionaire John Paulson has formed a coalition with 15 other founding members aimed at curbing years of what his hedge fund has called value destruction in the gold sector.

The coalition is aptly titled the Shareholders Gold Council and it is stated that the idea came about from Paulson & Co. during the Denver Gold Forum last September.

“Since last year, the gold price has crept lower and shareholder returns have been poor,” Marcelo Kim, a partner at Paulson, noted.

“Interest in the sector has continued to languish, and you have seen capital leave the space and notable fund closures,” he added.

The Shareholders’ Gold Council will be headed by Christian Godin, a former senior vice president at Montrusco Bolton Investments and the group intends to ensure the management and boards of mining companies are aligned with shareholder interests.

Also making news was the World Gold Council’s report that central banks have added 193.3 tonnes of gold to their reserves in the first six months of this year, totalling in an 8 percent increase compared with the 178.6 tonnes of gold bought this time last year, making it the strongest first half for central bank gold buying since 2015.

The council stated that gold remains an important component of central banks’ foreign exchange reserves.

“We believe some emerging market central banks could be adding gold to maintain a certain allocation level as overall reserves grow. Recent gold purchases may reflect higher overall foreign exchange reserve balances,” said the WGC.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.

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