With western economies imposing sanctions on Russia in response to the invasion of Ukraine, Goldman Sachs, one of the world's largest investment banks, has hiked the prices of its commodities forecasts, citing supply disruptions it says could push gold to new heights. According to Goldman Sachs, the rising conflicts in Eastern Europe have created clear inflation and economic growth risks that could drive the price of gold towards US$2,500 per ounce this year.
Prices of the precious metal surged to a high of around US$2,050 per ounce last week amid a wave of additional sanctions against Russia and the commodity looks on track to score one of its highest monthly performances in recent memory.
Some experts believe gold could play a starring role in the ongoing Ukraine conflict as Russia looks to the precious yellow metal for leverage amid ongoing sanctions. Gold’s unique function as an alternative currency – particularly in times of conflict - was on display when the Russian central bank announced it will resume buying gold from the domestic market recently as it scrambles for financial stability amid the ruble collapses and Russian stocks tumble.
Gold has traditionally been seen as a safe-haven asset that protects buying power against rising inflation due to its ability to keep its value over time and with several financial authorities including Goldman lifting its inflation outlook, the notion of an impending gold boom looks to be gaining momentum.
Closer to home, analysts are becoming more bullish that the Reserve Bank of Australia may be forced to raise interest rates ahead of its official outlook in May due to an increase in both headline and underlying inflation. Figures from the last quarter had headline inflation at 3.5 per cent whilst the Reserve Bank’s preferred measure underlying inflation was 2.6 per cent.
According to a recent economic outlook by the International Monetary Fund, inflation globally could remain high this year with an average inflation rate of 3.9 per cent touted in mature economies and 5.9 per cent in developing markets.
However, the dual threat of rising inflation and ongoing unrest in Europe could have real world effects on the project economics across a string of ASX-listed gold ventures and may have companies reshuffling priorities to capitalise on the gold bull market.
And it’s not just gold that has unleashed the bulls either – nickel’s incredible rise on international spot markets this week will stand as a head scratching moment for historical commodities chart watchers.
Last month nickel’s lowest spot price was around US$21,000 and this month it touched an amazing US$48,000 per tonne.
One company that is actively developing some interesting nickel targets is Oar Resources, a mixed metals explorer based in Perth, Western Australia.
Oar boasts a PGE-nickel-copper project within cooee of Chalice Mining’s world-class Gonnerville Julimar discovery in WA.
Oar is now gearing up to explore a smorgasbord of priority targets on its potentially fertile nickel-PGE ground however it also has a brace of gold projects outside Australia in Nevada, USA and Peru that could shoot up the food chain behind a rising appetite for gold. Oar’s South American venture in particular could prove invaluable as it already houses a gold processing plant that can toll treat up to 340 tonnes of ore per day and with a number of gold mines also scattered around project South America just might represent and early Pathway to cashflow for Oar.
Oar Resources' Managing Director Justin Richard said:"The recommencement of our drill program at the Douglas Canyon Gold Project in Nevada coincides with the rising gold price and has focused investor attention on the anticipated results.”
“Looking forward, higher gold prices are having a positive impact on the bottom-line financial modelling for the Chimu Gold processing Plant in Peru.”
Similarly, African focused gold developer Tietto Minerals believes the current outlook could serve as a shot in the arm for the company’s rapidly progressing Abujar mine that is currently developing at speed in Côte d'Ivoire.
Tietto Minerals’ Managing Director Caigen Wang said:“The current gold market supports Tietto’s decision and mine construction schedule of having first gold pour in Q4 of calendar year 2022, provides an excellent opportunity of delivering well above USD1000/oz net profit margin in our forecast of 260koz gold production in first year production.”
Tietto’s point of difference is that it has invested in its own fleet of drill rigs that have enjoyed extraordinary success in the field over the last year or so.
Importantly Tietto has already eked out a resource of 3.35 million ounces of gold.
Gold has long been considered a stable port in a financial or military storm for investors. In these uncertain times, it could also prove a boon to miners with plenty of the precious metal on its books. Given the upward trajectory of the price Goldman’s latest gold prediction appears to be a fait accompli, although time will still tell the commodities followers will no doubt have one eye on the price and the other on such prophecies.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Matt Birney
