Ground Breakers: Gold miners run as US economic data gets rally back on track

US jobs data and bullishness on bullion lead gold miners higher
ASX gold sub-index up 2.6% in early trade to take materials sector to 0.3% gain before lunch on Friday

Gold miners are on the run and major European bank Societe Generale has tipped prices rising to US$2200/oz from the second quarter of next year after lower than expected US inflation data brought prices back into positive territory this week.

The ASX gold sub-index was up around 2.6% this morning, taking the top gold producers on the Australian bourse to a near 2% gain for the week.

The cohort is up 13.67% year to date and 21.32% over the past 12 months, but still well below the highs seen in August 2020 despite the relative strength of the price of bullion.

The yellow metal’s capacity to balance against geopolitical drama has been brought to the fore since Israel’s campaign against Hamas in Gaza began after the events of October 7.

Prices lifted 1.1% last night in the US to US$1983/oz after initial US jobless claims hit a 12-week high of 231,000, following the release of inflation data earlier this week which provided hope interest rates could be pulled back by the US Fed.

Higher interest rates tend to be negative for gold, because it does not accrue interest, driving investors to interest bearing investments like cash and bonds.

That also means gold tends to fair poorly when the US dollar is rising, as do a range of industrial metals which are traded internationally in US dollars.

Fitch research unit BMI said it expected gold prices to remain elevated despite a cooling in the safe haven effect of the Middle East conflict in the past week.

“We remain neutral towards gold prices for 2023, expecting prices to average USD1,950/oz. In the longer term, we expect prices to be supported by a gradual weakening of the US dollar and US treasury yields,” its analysts said.

“Beyond 2023, while we expect significant price volatility, we expect gold prices to remain elevated in the coming years compared to pre-Covid levels.”

And on the markets

All the big gold miners were in positive territory this morning, with Northern Star (ASX:NST) up 3.62% early doors.

Evolution (ASX:EVN) ran 4.44% higher and is now up some 23% YTD, with Regis (ASX:RRL), De Grey (ASX:DEG), Perseus (ASX:PRU), Ramelius (ASX:RMS), Westgold (ASX:WGX), Gold Road (ASX:GOR) and Capricorn (ASX:CMM) all up between 2% and 5%.

That compared to stagnant prices for the major iron ore miners and largely negative movements for the lithium crowd, with Allkem (ASX:AKE) down 3.65% and Pilbara Minerals (ASX:PLS) off 1.12%.

The materials sector rose 0.3%, largely led by the gold space.