|Bid||0.0000 x 21500|
|Ask||0.0000 x 21500|
|Day's Range||12.67 - 12.69|
|52 Week Range||11.53 - 13.44|
|PE Ratio (TTM)||N/A|
|Beta (3Y Monthly)||-0.05|
|Expense Ratio (net)||0.40%|
In the week following the announcement, Randgold rose 10.4% and Barrick was up 5.8%, while the NYSE Arca Gold Miners Index was down 1.3%. The Barrick–Randgold merger was unique in that Barrick Gold didn’t pay a huge premium for Randgold. The two companies announced that Barrick Gold would be taking over the latter for $6.0 billion, which represented a negligible premium over Randgold’s stock price.
Barrick–Randgold Sets the Bar for Future Gold MergersVan Eck Gold Consolidated, Gold Stocks Declined, But Positive Trends Emerge
Most gold companies have ample flexibility to weather a slump in gold prices. Debt has been reduced to levels that are manageable at lower gold prices and many companies have no net debt. Mining costs exclude exploration, capital projects, and other administrative costs.
While it was disappointing to see gold fall below $1,200 per ounce, current extreme positioning (also characteristic of the lows in 2001) suggests the price will not remain at these levels. Gold has established a long-term base in the $1,100 to $1,365 range. According to a report by Gluskin Sheff + Associate, since 2009, the world’s central banks have injected a mind-numbing $13 trillion of stimulus into the financial systems.4 They are now beginning to withdraw that stimulus.
The Vanguard Group announced that its $2.3 billion Precious Metals and Mining Fund will change focus in late September to a more diversified mandate that features telecommunications, utilities, materials, and natural resources. The last time Vanguard changed the fund’s mandate was also at a low in the gold market. As of June 30, the Vanguard fund was approximately 77% invested in gold, silver, and other precious metals stocks.
The gold price in U.S. dollar terms has not responded to the Turkish crisis because, at this time, it poses virtually no immediate threat to either the U.S. economy or global financial system. Gold fell $22.69 (1.9%) to end the month at $1,201.40 per ounce in response to the August U.S. dollar strength. The gold price made what appeared to be a capitulation low of $1,160 per ounce on August 16.
The robust U.S. dollar has weighed on gold since May, and in August the U.S. Dollar Index (DXY)1 again reached new yearly highs. U.S. dollar strength was mainly due to emerging markets (EM) currencies that weakened in response to a currency crisis in Turkey. President Trump tweeted that he would increase steel and aluminum tariffs and impose sanctions against two officials in an effort to gain the release of a U.S. pastor detained in Turkey.
Gold tested the low end of its trading range in May. As gold has shown price weakness ahead of Fed rate increases, we expect gold to continue to drift around the bottom of the range until the expected rate increase on June 12. Futures positioning and flows into gold bullion exchange traded products suggest gold is poised for another post-Fed meeting rally. The immediate challenge comes from strong economic growth and robust jobs numbers that bolster the case for higher interest rates.
The second half of 2018 should be very interesting for the gold market. The chart shows the gold price has formed a wedge or pennant pattern that has been in place for several years. The positive aspect of this pattern is the trend of higher lows.
NATALIA GURUSHINA: Welcome, I’m Natalia Gurushina, Chief Emerging Markets Economist at VanEck. With global rates normalizing, geopolitics still posing major risks, and with one of the longest bull runs in U.S. stocks apparently stalling, 2018 might be a year of paradigm shift. I am here today with VanEck CEO, Jan van Eck, to discuss his outlook, macroeconomic outlook, and also to talk about his views on the most appealing opportunities in this challenging environment. So let me ask you a very simple question first: Is there still an investment case for real assets, including commodities?