A Fed pivot needed to turnaround bearish gold prices: Macquarie

The Macquarie commodity strategy team expects gold to reach a trough low of US$1,500 an ounce in the second quarter of 2023 to reflect an even more hawkish-than-anticipated Fed.

The analysts said the price of gold has shown "impressive resilience since the start of 2022 with prices prices now trading at a $600/oz premium to the "fair value" price implied by the current 10 year TIPS yield."

"Taking the 1970s and 1980s as a guild, gold prices could move lower while current real interest rates appear to be rising sustainably, on account of falling inflation."

Gold prices between 1970-1990 (Source: TradingView)

A pivot is needed

Macquarie believes the Fed "pivoting from tightening to an easier policy presents a catalyst" to re-rate deteriorating gold names.

"The team expects gold prices to bottom once the market begins to price in a Fed pivot," the analysts said.

Source: Macquarie Research

Top picks and what to look out for

Macquarie's preferred established producers include Northern Star (ASX: NST) for its organic growth profile and Gold Road Resources (ASX: GOR), also for organic growth and cost insulation.

Towards the smaller end of town, Bellevue Gold (ASX: BGL) was a favoured pick for a potential developer to producer re-rate and De Grey Mining (ASX: DEG) for its exploration and development potential.

More broadly speaking, Macquarie highlighted a few risks and catalysts that could inspire further upside and/or downside to various gold names including:

• Newcrest Mining (ASX: NCM): Changes in operating conditions such as increased rainfall for the open pits can impact the production of key operations like Cadia, Lihir, Telfer, Havieron, Fruta del Norte and Red Chris

• Evolution Mining (ASX: EVN): Red Lake's performance remains important to Macquarie's long-term outlook

• Regis Resources (ASX: RRL): Government approvals of the McPhillamys Project in NSW is both a key long-term and near-term catalyst

• Ramelius Resources (ASX: RMS): Release of various studies could change Macquarie's base cased and important near-term catalysts

• Perseus Mining (ASX: PRU): The study work over the next 12 months at Block 14 is a key factor towards the company's long-term outlook