A Fed pivot needed to turnaround bearish gold prices: Macquarie
Macquarie commodity strategy team remains bearish on gold and recently downgraded its price outlook.
Source: iStock
Mentioned
KEY POINTS
- Macquarie's commodity strategy teams remains bearish on gold
- Prices are forecast to bottom around US$1,500/oz in the second quarter of 2023
- A Fed pivot is necessary to inspire a turnaround for gold prices
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
