Gold price edged higher in January, hitting the highest level US$1320 since last June as the Federal Reserve signaled it may have reached the end of its latest series of interest-rate increases, also it may wind down its gradual asset-shedding operation sooner than thought. We see several trends will drive the gold price, including financial market instability, monetary policy and the US dollar, structural economic reforms in emerging markets, strong central bank demand, and the ongoing net positive flows into gold-backed ETF. With silver prices outperforming YTD, this does point to the potential return of the gold/silver ratio. Also the base metal prices showed a little rebound in January which might be still tumble and weak in the near future.
Global stock markets remained volatile, driven by trade conflict, geopolitical concerns, monetary policy uncertainty, credit concerns and lofty stock market valuations. The mining industry equities of North American and Australia showed strong performance with upward gold price, while the Asian markets were still struggling. The 2018 operating results and 2019 guidance of gold producers are in-line, compare to the weak performance and guidance of some base metals producer. The balance sheets of the whole mining industry seems stable with cutting debt and cumulative cash.
We have seen a sharp increase in gold sector deal flow with takeovers and asset sales as we expected. Seeing as M&A amongst the large producers in the gold space is the topic of these days, Barrick & Randgold and Newmont & Goldcorp transactions has changed the whole patterns of gold producers, which might be a signal of new cycle of the whole industry. We are exploring the realm of opportunities for more M&A.