Rosy outlook for gold, more declarations expected

All the signs and portents push towards an arc of escalation for gold prices.  From hopeful to experts to market watchers, there is sharp optimism that the price per ounce of the treasured yellow metal is going to shake off the shackles and surge to increasing heights.  The Guyana Gold Board is looking forward to a greater percentage of the production in the goldfields making its way to its offices.

The word from most places is positive, as in price breakthroughs.  The economic indicators are massing in one favourable column after another and, in aggregate, could be representative of things to come that ought to assist a somewhat languishing local gold sector.  One prediction is for prices to breach the still distant, but now not too unreachable, $1700 per oz. threshold not too far from now.

From the perspective of the Gold Board, the sentiments surrounding certain developments, and those believed to be signaled, could not come at a better time, as a boost is much needed currently.  The first half of 2019 registered less than stellar declaration levels from most of the known and usual contributors.  One foreign investor experienced some labour issues, now partially resolved; and others have revised their estimates.  Save for one participant, who has stepped up with more gold declarations, the record of the first half has been of studied tactical withdrawal in some instances and lower declaration numbers overall.  The usual scapegoats have been resurrected and presented: weather, roads, taxes, and margins.  In terms of the latter, the outlook should be considerably improved, in a period that holds predicts sharp increases, in a sea of volatility.  A look at the pricing projections environment is now timely.

The Guyana Gold Board has noted the following: 1) clear indications, from usually stodgy Central bankers in Europe and the United States, of a greater inclination towards further interest rate easing to offset preemptively feared threats from several directions and associated economic slowdown; 2) a concerted and sustained predisposition by states either hostile to, or locked in fierce competition with, the United States to detach from the dollar, which has held near universal acceptance for long (countries in the forefront of such efforts include: China, Russia, Iran, and Venezuela among many stalwart global presences); 3) the related commitment by Russia and China to thrust forward still more powerfully to de-dollarize, with other significant nations readying to jump on the bandwagon; and 4) the stated positions of several influential hedge fund managers, including Paul Tudor Jones, who was quoted in an interview with Bloomberg as saying that, “gold has everything going for it” and that $1700 per oz is on the near-term horizon.

 In addition, there is the generalised sense that the world is at the crossroads of a momentous shift, with an emphasis on deleveraging from the US dollar.  The American currency has held the world in its palm since Bretton Woods, despite Richard Nixon’s 1973 decoupling of the US dollar from convertibility to gold, through two major oil shocks, wars, and major and minor recessions of global proportions.  Now all of that is moot, and the dollar is under increasing attack, and slowly giving ground.  A sea change could be in the making.  The Gold Board is also monitoring the developments relative to uncertainties over trade, and tensions in the Persian Gulf that are intensifying.

The point of all of this is that what is bad for the dollar and the economy, and what is troubling about geopolitics and the associated alarms, are all heavily favourable to gold prices, with projections reaching close to somewhere around a 50% increase from where prices were a few short years ago.

With prices already breaking existing resistance levels on an almost weekly, sometimes daily, basis, and reaching for higher ground, those on the sidelines, and those not going at full acceleration may just be incentivised to pick up tools and step into the mining fields to resume legitimate mining operations.  In the past several years, the Gold Board did observe that a number of significant players were content to be fence-sitters, or political tealeaf readers, or diversifiers into real estate and oil, or retreaters from increased regulatory scrutiny.  This has crimped gold declarations.

For its part, and on the operational front, some flexibility has been put in place relative to the existing cash-cheque combination payment regime.  Also, there is conversation with sector representatives on addressing the Gold Board’s concerns (and built-in disadvantages) over the issue of a fair, reasonable, and practical foreign exchange rate in its buying operations.

On another note, work has begun on a system that, upon its completion and delivery, will enhance regulatory obligations in keeping with mine to market and CFATF expectations.  An area of some concern is awareness that other authorised gold buyers have attracted business from existing sectoral participants, through the offering of credit facilities.  If this is practised on a sporadic and immaterial basis, and under the umbrella of ‘personal loans’ then there should be minimal exposure.  On the other hand if, in aggregate, these so-called ‘personal loans’ amount to significant sums, then there would be the reasonable, if not mandatory, regulatory concern of source of such funds, and the need for a corresponding, confirming paper trail.

In the interim, the Gold Board has continued its outreach into Mahdia, and seeks to solidify its presence there, as well as in other locations currently being studied.  Also, the Honourable Minister of Natural Resources, Raphael Trotman, is readying to meet with stakeholders to discuss and finalise, once and for all, sealing of gold earmarked for export by licensed agents.  Progress, albeit slower than envisioned, has been recorded in this the preliminary stages of its building project preparations.  All in all, the Guyana Gold Board look forward to a brighter and bigger second half of 2019; and especially with gold prices pointing to higher arcs in the immediate and intermediate future.