Gold SWOT: Silver Is Taking a Play from Gold’s Handbook

Strengths

• The best-performing precious metal for the past week was platinum, up 2.01%, breaking through the $1,000 per ounce mark which it hasn’t done since July. Touching on India, the World Gold Council stated: “Following an initial surge in consumer demand (for jewelry and bars and coins) due to the sharp import duty cut, demand is reported to have since normalized. However, market reports indicate that overall buying momentum remains healthy, with an uptick compared to the period before the import duty reduction.”
• Silver is living up to its promise as the Federal Reserve interest rate-cutting narrative gains greater traction. The cheaper precious metal is outperforming gold by a comfortable margin, flaunting a 33% year-to-date gain compared with the latter’s 28% rise. Right now, it is on pace to close out a fourth consecutive quarterly climb in what would be the longest winning run since 2011, according to Bloomberg.

• Gold hit another all-time high as traders parsed the latest remarks from Federal Reserve officials (timing and speed of future interest rate cuts) and prepared for key U.S. economic data, Bloomberg reports. Bullion hit a record of $2,640.11 an ounce, beating the previous all-time high.

Weaknesses

• The worst-performing precious metal for the past week was palladium, down 5.90%, perhaps on news of weakening auto sales. The government of Mali announced its plan to start mining and processing lithium with help from the Russian Federation. Whether this deal proceeds to reality may be another story, but it represents a further inroad of Russian influence into West Africa’s gold mining territory.
• According to Scotia, SSR Mining announced that the Seabee gold mine in Saskatchewan will restart operations in the second half of October following a suspension of operations that began on August 21 due to wildfires in the region. Following the suspension of operations, the company initially forecasted five days of mining and processing downtime, later increasing this estimate to 25 days of downtime; given the latest announcement, SSR Mining increased its allowance for mine downtime to 65 days in total.
• Following Petra Diamonds’ pre-released F2024 operating results, the company reported its F2024 financial results with EBITDA slightly below BMO’s estimate. Looking forward to F2025, free cash flow generation remains a key focus for Petra as the company looks to navigate the weakness in the diamond market.

Opportunities

• Nano One Materials gained 52% for the week as the U.S. Department of Defense awarded the company a $12.9 million grant. The project will support work underway at Nano One’s Candiac, Québec location, which is North America’s only lithium iron phosphate (LFP) production facility.
• U.S. consumer confidence unexpectedly fell in September by the most in three years on concerns about the labor market and the outlook for the broader economy. The Conference Board’s gauge of sentiment decreased 6.9 points to 98.7, the biggest drop since August 2021, data out Tuesday showed, according to Bloomberg.  
• Gold is on course to complete a fourth quarterly rally, and there seems to be little on the horizon to stop its bull run. The precious metal has surged more than 40% in the past year, Bloomberg reports, with its fortunes burnished by traders factoring in deep interest-rate cuts from the Federal Reserve.

Threats

• African Rainbow’s healthy balance sheet reduces risk in a more severe and protracted downturn, in UBS’s view. However, in the absence of a recovery in commodity prices, the group believes the company needs to demonstrate improved operational performance, willingness to crystallize value in their Harmony stake, and commitment to returning excess cash to shareholders to fully unlock the valuation discount.
• B2Gold Corp has had a rebound in its share price with the resolution of its taxation and operating uncertainty in Mali. In addition, B2Gold cleared the air with regards to capex for the Goose Project. With that news, insiders COO William Lytle and Senior VP: Legal & Corporate Randall Chatwin at B2Gold, both sold a significant part of their shareholdings into the recent price strength.
• Bank of America notes gold prices are 15% above the 200-day moving average. Historically, returns are flat one to six months after trading at such extremes. Gold investors are also already discounting 150-200 basis points of interest rate cuts, and if Fed cuts are slower than expected, the pace of gold gains could also slow.