Gold stocks slide but analysts remain bullish
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The news: Gold stocks dipped on the ASX after the spot gold price fell overnight despite analysts remaining bullish on bullion prices.
The numbers: By 11:40am AEST, Evolution mining fell 4.8% to $3.90, West African Resources fell 3.5% to $1.44, Ramelius Resources fell 3.13% to $1.94, and Regis Resources fell 3.07% to $1.89.
Gold prices recently surged to an all time high of USD2,470 ($3,686.2) per ounce, but Morgan Stanley analysts forecast that there’s room for it to rise to USD2,650 during the fourth quarter. Gold is up 50% from its 2022 lows and has increased 25% in price since February of this year.
Spot gold was down 0.78% to USD2,425.93 by 12:00pm AEST.
The context: ASX gold stocks climbed Wednesday after gold hit a new record price based on speculation that the US Fed would cut interest rates. Gold speculation has since slowed as investors become sceptical over the basis for the record valuation.
Morgan Stanley saw slowing but historically high rates of physical gold purchase by central banks, particularly China, as the main driver behind the price boom.
While the analysts believed that accelerating financial flows for the metal would accelerate approaching a US rate cut, they noted potential for high price volatility as more information becomes available on the likelihood and size of the cuts.
Morgan Stanley expects a first US interest rate cut in September but are cautious of rising fears that the US economy could be headed for a recession with slowing consumption and labour market indicators. If a recession were to play out it could boost safe haven demand, they said, and more rate cuts would be supportive for gold inflows.
The source: Morgan Stanley research
