Australian sharemarket: Gold price moves

Tonkin said gold companies were investing or positioning themselves for potential consolidation, but high gold prices are not the primary driver of activity. “It’s about how do they insulate or protect, be a bit more defensive [in the face of] cost pressures, and make sure they can operate throughout the cycles,” he said.

“We have three key production centres. We’re just investing in Kalgoorlie, our most significant one, to grow that. We certainly have interest to get a fourth production centre, but we stick to the discipline of capital investment. We’re very patient in that regard.”

Junior gold producer De Grey said last Thursday it had tied up a deal with Novo Resources Corp to significantly expand the exploration footprint next to its Mallina Gold project in Western Australia’s Pilbara region.

“By expanding our exploration footprint in the region by 70 per cent, we increase the potential to discover new gold resources capable of being processed at Hemi in the future,” De Grey’s managing director, Glenn Jardine, said.

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Analysts at finance house Citi said the macro environment was skewed positively towards gold investment for the next 12 months. “We think trading could hit $US2200 an ounce into year-end 2023 or the first half of 2024, and average north of $US2000 an ounce next year,” they said.

”In our view, gold remains a viable macro portfolio tail hedge – both historically and during the current post-pandemic era. This is despite a hawkish Fed regime. We believe bullish bullion sector tailwinds will re-emerge before end-2023,” Citi said in a note to clients.

Tonkin said he doesn’t “typically try to guess gold price”.

“There are options for us in all those environments to capitalise on it, but we certainly don’t see global instability easing with inflation pressures and the potential for the Ukraine-Russia situation to continue. That usually holds the gold price up for longer or higher. We certainly don’t bank our business on it [the gold price] going up, down or sideways, but we have ability to flex within it.”