Commodities
Just going to keep it quick and stick to some gold thoughts this morning.
Precious metals
Gold continues to be well supported at the moment with another couple of percentage points added this week, with the first close above the 200dma since November thrown in for good measure. Other than for the brief sojourn in Oct/Nov 2016, the last significant break-through was back in early 2016.
Bloomberg published some thoughts that would get the bulls frothing at the mouth when considering the decline of gold from its 2011 high. The 23.6% Fibonacci line has been crossed and the 38.2% Fibonacci is at $1,380…
Admittedly, nothing goes up in a straight line, and the trading indicators are suggesting we are overbought at these levels, but using our scorecard analysis, the weakening optimism for dollar strength (as noted by Donny last night), latent economic uncertainty (A50, French elections, Chinese debt levels), concerns over high equity valuations (The UK now has all 10 industry groups returning positive 5 year rolling performances for the first time), neutral trading positions (short positions were peaked around the recent US rate decision and then collapsed when the conversation switched to deleveraging the Federal Reserves’ balance sheet) all seem broadly supportive of further price appreciation.
Remember we are bulls of Centamin, Polymetal, Randgold and Ariana, who recently announced first production
*The management of Ariana are seeing investors from the 19th to the 25th April. Might be a good time to meet management, especially as their project development pipeline could start to attract predatory interests…
Our large cap gold universe normalised over three years.
I will leave you with a copy of our quite excellent Chief Economists comments from this morning (yes, he that actually speaks sense, despite being from Hull)
“The bear argument is predicated on a stronger US Dollar. The Trumpmeister's comments overnight have called that into question: "I think our dollar is getting too strong, and partially that's my fault because people have confidence in me, but that's hurting -- that will hurt ultimately." If you look past the fact that the leader of the free world can barely string a coherent sentence together I think he is suggesting low interest rates from the Fed might be preferable. Who would have thought that from a real estate billionaire?! For the last two years we have been repeatedly more dovish than the Fed & the economist consensus. A rate hiking cycle in the US (while the rest of the developed world is doing QE) always looked ambitious given it will push USD higher and reduce US demand. It will take Draghi, Carney & Kuroda to change path for the Fed to tighten without a large spike in the USD. Given they aren't budging then it’s a case of the Fed going slow and this being supportive for Gold”.
Company announcements/news/meetings:
Centamin (LON:CEY) (Buy): Q1 Preliminary production report – Keeping calm and carrying on…
“Centamin's Q1 preliminary production results are largely in line with our assumptions, given the very well-flagged impact from the low-grade cutback in the eastern wall undertaken during the period. We reiterated our positive view on Centamin and 209p target price”.
The low-grade cutback had been undertaken as planned, with additional low-grade stockpiles also processed. Certainly clears the path for more value accretive progress in the coming months.
Lucapa Diamond (ASX:LOM) (Buy) Auction results and more production growth from Lulo.
Lucapa continue to do everything they say. This week saw the results of their latest tender with 1,9119cts sold at an average value of $1,317/ct, the sale did not contain any headline grabbing stones yet brings the year to date total to $13.2m at an average of $2,055/ct. The sale of the 92ct D-colour diamond recovered from the new mining block 28 will be in the next sale.
Tonnes treated during the period and carats recovered are directly attributed to the increased plant availability during the wet season following the installation of the new wet-front end and diamond recovery circuit. Grade dilution, we believe is transitory due to the impact of the rains and processing of lower-grade stockpiles.
Polymetal (LON:POLY) (Buy): Added to Q2 conviction list
“Polymetal is possibly one of the largest precious metal producers that investors have overlooked. That said, we believe Polymetal offers a sector-leading growth profile, an efficient approach to geographically challenged, high-grade resources and is a market leader in POX plant operations recovering gold from refractory ore. We believe the low-cost nature of Polymetal's "hub" operations, coupled with further resource development and an increased dividend pay-out policy, are more than sufficient reasons for investors to reappraise the Polymetal investment case. We reiterate our Buy recommendation and 1192p target price.
Upcoming company meetings include Highland Gold, Anglo Pacific.
Companies reporting next week include: Polymetal, Acacia – stock up 8% today anyone suspect a resolution to the Tanzanian government’s restriction on the export of Au/Cu concentrate sales? And Rio Tinto. (Anglo and Petra are on the 24th).