Zacks Industry Outlook Highlights: Golden Star Resources, Richmont Mines, Barrick Gold, IAMGOLD And Yamana Gold

For Immediate Release

Chicago, IL – June 17, 2016 – Today, Zacks Equity Research discusses the Gold, including Golden Star Resources, Ltd. (GSS), Richmont Mines Inc. (RIC), Barrick Gold Corp. (ABX) , IAMGOLD Corp. (IAG (LON:ICAG)) and Yamana Gold, Inc. ( AUY).

Industry: Gold

Link: https://www.zacks.com/commentary/83219/gold-has-strong-tailwinds-courtesy-brexit-fed-and-india

Gold has regained its luster, as exemplified by a 21% rise since the beginning of the year with prices flirting close to the $1,300 mark. Needless to say, the yellow metal has been the best performing asset in the first quarter, trouncing major equity indices, investment grade and high yield bonds and commodity indices.

What Set Gold Rolling?

A weakening greenback, slowdown in China, volatile equity markets and introduction of negative interest rates by several of the world’s central banks (including Japan) have spurred safe-haven demand for gold.

The spike in gold prices has led to a surge in the share prices of many gold miners. Among others, Golden Star Resources, Ltd. (GSS), Richmont Mines Inc. (RIC), Barrick Gold Corp. (ABX) , IAMGOLD Corp. (IAG) and Yamana Gold, Inc. ( AUY) have appreciated more than 150% year to date.

Gold vs. the Fed

Part of gold’s recent allure is due to the Fed’s ‘lower for longer’ view of monetary policy. A combination of uneven economic readings and global uncertainty has forced the Fed to take a pass on following up on its December 2015 rate hike, with many in the market sceptical of any rate hike at the July meeting either.

Brexit: Will it or Won’t it Happen?

Another macroeconomic factor that the market is scared of is the possibility of United Kingdom exiting the European Union. The referendum scheduled for Jun 23 is closely watched and, in case UK voters decide to leave the union, there is sure to be more turbulence in the market ahead. This uncertainly is also fuelling gold prices.

Record Global Gold Demand in Q1

As per the World Gold Council, the first quarter of 2016 was the best on record with total gold demand rising 21% year over year to 1289.8 tons. Following outflows over the last three years, ETF inflows surged to a seven-year high of 363.7 tons.

Negative Interest Rate Policies (NIRP) implemented by central banks in Japan and Europe, China’s devaluation of the yuan stoking fears over the country’s economic health and the potential impact on global growth and the slowdown in the pace of U.S. interest rate triggered a flight to safety. This led to a 122% jump in total investment demand. Total bar and coin demand edged up 1% year over year to 253.9 tons.

On the other hand, jewelry demand dropped 19% to 481.9 tons in the quarter. Grabbing headline was the 41% plunge in jewelry demand in India to 88.4 tons, the worst quarter in the past 7 years. This was mainly due to the Finance Ministry’s plans to impose a 1% excise duty on jewelry manufacturing, which led to a nationwide strike in March.

Demand in China also fell 17% in the quarter to 179.4 tons affected by higher gold price against a backdrop of continued economic slowdown. In the technology sector, gold demand was down 3% to 80.9 tons.

The central banks were the primary acquirers of gold, purchasing 109 tons net over the quarter, the 21st consecutive quarter of net purchases. The accumulation of gold reserves is an act of diversification, especially away from the U.S. dollar.

Supply, Production Up: Will it Stay?

Total supply in the first quarter increased 5% year on year, driven by an 8% increase in total mine supply (the sum of mine production and net hedging), offset by a 1% dip in gold recycling.

Mine production in the quarter grew 5% to 734 tons led by increases at Barrick Corporation’s Goldstrike and Cortez projects in the U.S., Fresnillo (LON:FRES) PLC’s Herradura and Noche Buena in Mexico and Newmont Mining Corporation (NYSE:NEM) Batu Hijau mine in Indonesia. Russian production was aided by a 9% increase in output by Polyus Gold.

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