The price of gold has shown signs of reversing course ahead of the May low ($1670) as it extends the series of higher highs and lows from the previous week. The precious metal attempted to test the 2012 high ($1,796) as the Federal Reserve prepares to have the Municipal Liquidity Facility along with the Main Street Lending Program up and running in June.
Analysts expect this to fuel a bullish market for gold and pull gold stocks of junior gold miners as a result. $1,750 marks a critical level for the bulls in the short-term. Spot gold was flat at $1,739.48 per ounce, as of 0344 GMT. U.S. gold futures rose 0.1% to $1,752.10.
Gold prices on Tuesday held on to last session’s more than one-week high on rising tensions between the US and China. Escalating violent protests in the United States also contributed to fears of resurgence in virus cases, although the reopening of economies is stabilizing markets.
Reflecting investor sentiment, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, saw its holdings rise 0.5% to 1,128.40 tonnes on Monday - the highest in seven years.
“It appears that there are factors both supporting, and limiting appreciation in the gold price,” said National Australia Bank economist John Sharma.
Gold stocks of Canadian junior gold miners reacted to gold price fluctuations this week. Several junior gold mining companies showed strong performance. Among them, Toronto-based gold miner IAMGOLD Corporation acquired 39 mineral claims in multiple cities called the "Fayolle property" from Monarch Gold Corporation. This acquisition allowed IAMGOLD to hold its recent gains, bumping its shares from $3.50 to $3.80 a share last week.
The largest god miner in the world - Newmont Corporation saw its gold stocks rise 36.9% in 2019. Although the company was hurt at the start of the pandemic, it managed to recover and increase its gold stock price to $59 a share on average. Its business has reportedly been positioned well to handle the economic struggles that the virus has caused.
Market analysts and economists foresee more volatility in the gold market in the weeks to come. As economies start to reopen and tensions between US and China worsen, world markets are potentially bracing for a second wave of coronavirus in the fall. Overall, Canadian junior gold miners have not experienced significant disruptions to their production or supply chain. In fact, gold stocks have shown considerably positive performance in these uncertain times due to the increase in demand for gold.
It could be a good idea to have some junior gold mining companies on your list of gold stocks to watch for the future.