Gold SWOT: Historically, gold sees a rally in the month of January

Strengths

• The best performing precious metal for the week was gold, but still down 0.98%. Gold is set for its first weekly drop in a month, largely fueled by resilient labor market numbers reported this week which have quelled investors’ expectations of a rate cut as soon as March.
• Investors flocked to gold in record numbers in 2023 as global economic turbulence triggered a flight to safety, according to the Royal Mint. The number of people buying gold bars and coins jumped by 7% year-on-year, surpassing the highs of the 2020 lockdown investing boom. The British coin maker said this was due to a jump in small-scale retail investors buying “safe haven” assets.  At the same time, The Royal Mint’s total payouts to customers selling back their bullion surged by nearly half after gold prices hit an all-time high last year.
• Gold rose as Federal Reserve policymakers pushed back against expectations for aggressive monetary easing early this year. Minutes from the central bank’s December meeting released Wednesday showed that policymakers agreed that it would be appropriate to maintain a restrictive stance “for some time,” while acknowledging they were probably at the peak rate and would begin cutting in 2024.

Weaknesses

• The worst performing precious metal for the week was palladium, down 6.83%. Platinum was also down 3.54%. Palladium has been weakened by substitution with the cheaper option, platinum. However, both metals continue to suffer from the poor outlook on future demand with the increased adoption of electric vehicles.
• OreCorp published a supplementary bidder’s statement for Silvercorp’s proposed acquisition of the company and its Nyanzaga Gold Project in Tanzania. The Tanzanian Fair Competition Commission (FCC) has now informed Silvercorp and OreCorp that it considers a new merger approval may be required.
• Gold Fields Ltd. suspended work at the South Deep mine, which sits on the third-biggest known body of gold-bearing ore, after a worker was killed at the operation in South Africa. “An employee was fatally injured underground in an incident involving trackless mining equipment,” the Johannesburg-based company said in a statement Thursday. 

Opportunities

• Gold historically sees a January rally, based on its performance over the last decade. The precious metal typically posts a 3.5% increase during this month. Gold has already started 2024 on a strong note, building on 2023’s 13% gain.  Investors are now pricing in an 80% probability of a Federal Reserve interest-rate cut in March.
• According to BMO, FireFox Gold is exploring at its Kolho, Jeesiö, Mustajärvi, Seuru, Ylöjärvi, and Riikonkoski projects, all in Finland (in which Agnico's Kittila mine is located). Agnico Eagle has acquired 19.01M units (each is 1 share and 1 warrant), representing 10.9% of shares for $1.4M. An earn-in agreement also gives Agnico Eagle the right to earn a 51% interest in the Kolho properties in Northern Finland; upon earning 51%, Agnico Eagle will be the operator of the project and will have the right to acquire an additional 24% interest.
• Barrick Gold Corp. has spoken with some of First Quantum Minerals Ltd.’s major investors to gauge their support for a potential takeover, after the sudden closure of its flagship mine left the Canadian copper producer reeling and wiped out more than half its market value. Barrick CEO Mark Bristow approached some of First Quantum’s largest investors late last year, according to people familiar with the situation, who asked not to be identified as the talks were private. It was not immediately clear if Barrick has made a fresh approach to First Quantum, and there is no guarantee it will make a formal offer.

Threats

• Endeavor announced the termination of CEO Sébastien de Montessus, whose dismissal follows from an investigation into two separate incidents including irregular payment instructions relating to asset disposals totaling $5.9 million, as well as personal misconduct due to a reported incident in October 2023. The CEO transition at Endeavor comes as the Sabodala-Massawa Phase 2 Expansion (Senegal) and Lafigue (Cote d’Ivoire) projects are scheduled for first gold in the second and third quarter 2024 production, respectively, potentially putting these timelines at risk.
• Gold Road’s share price slumped as much as 8% after reporting a 16% quarterly decline in production, reports Bloomberg. RBC analyst Alex Barkley noted that the weak operating quarter has the potential to see carry-over issues extending into 2024. Production shortfalls could reduce revenue in the future.
• Investors of bullion-backed exchange-traded funds (ETFs) are on edge, with December marking the seventh straight month of outflows despite gold’s positive performance last year. The trend may not reverse until the market is convinced that the Fed is firmly on a path of looser monetary policy, which tends to help the non-interest-bearing metal, as reported by Bloomberg. Expectations that the central bank was poised to cut interest rates sooner than expected helped propel the precious metal to a record last month. But that euphoria has since tempered with swaps markets now seeing an almost 70% chance of a cut by March — lower than the 85% odds seen in late December.