November 2017

Gold’s future path and corporate strategies heading into 2018

RBC Capital Markets hosted its 16th annual Senior Gold Conference in London, UK, bringing together our clients representing international investors and 14 of the gold industry's leading mining executives to discuss, in an interactive ‘fireside chat’ format, industry themes and their company’s strategies.  Throughout the day, gold industry executives discussed creating shareholder value with an emphasis on margin growth, driven by cost control and reserve growth, rather than production growth.

Recent years have been challenging for many resource sectors, not just within the gold mining industry.  We are heading into 2018 with improving global economic growth forecasts, modest inflation indications and expectations of Central Banks tightening monetary policy; combined these factors have historically provided a head wind for higher gold prices.  However, political instability in the Middle East, North Korea tension, and unpredictable policy responses from the President Trump & his Administration have resulted in an elevated level of geopolitical risk, which have been providing support for the gold price. 

When asked whether the gold equities are adequately pricing geopolitical risk: “78% of the Conference attendees believed they are not” and 58% of those same attendees were of the view that “gold will remain above the $1275 threshold over the next 3 months”.  Year to date gold has rallied 15% to the current $1,290/oz level and Stephen D. Walker, Head of Global Mining Research believes that “In the current heated geopolitical environment the gold price looks well supported and we expect gold to trade in a tight range around $1,300/oz into year end and early 2018.”

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