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Wednesday, December 6, 2023

Top Stories This Week: Gold Price Takes Off After Fed Hike, Mexico Adds New Mining Law

The gold price fell below the US$1,980 per ounce mark in the first half of this week, but it didn’t stay there for long.

The yellow metal was on the rise again mid-week, reacting to the news out of the US Federal Reserve’s latest meeting, which ran from Tuesday (May 2) to Wednesday (May 3). The central bank was widely expected to raise interest rates by another 25 basis points, and that’s exactly what it did — the target federal funds rate now ranges from 5 to 5.25 percent.

Gold tends to perform better when interest rates are low, not when they’re high, but the Fed’s commentary is also important to consider — experts have latched on to the fact that its post-meeting press release includes wording similar to the language it used when it stopped hiking rates in 2006. Expectations for a pause in mid-June are now running high.

Against that backdrop, gold sped higher on Wednesday, sparking reports that it had hit a new all-time high. In a tweet, John Reade of the World Gold Council said that while he did see a fresh high in COMEX futures, the spot price didn’t quite get there.

There are also other factors beyond the Fed that are influencing gold right now. Chief among them is the ongoing banking crisis — the latest casualty is First Republic Bank, which was seized by regulators on May 1. Its deposits and most of its assets have been sold to JPMorgan Chase (NYSE:JPM), a move that has sparked questions about banks that are “too big to fail.”

Gold has a key role as a safe haven, and many experts continue to believe it could go much higher in 2023. Here’s how Don Durrett of GoldStockData.com explained it in a recent interview with the Investing News Network:

“In the short term, I think gold’s going to go down somewhere between US$1,800 and US$1,850, and that’ll be that final capitulation selling. Once that’s done I think then as long as gold holds U$1,800 … we should get to US$2,300 this year. If we stay above US$1,800 say between now and the end of June, then I really think that gold will really run fast. And silver will just — it’ll come running” — Don Durrett, GoldStockData.com

Click here to watch the full interview with Durrett.

Gold was changing hands around US$2,015 at the time of this writing on Friday (May 5) afternoon.

​Mexico’s new mining law sparks concerns

In a rush session last weekend, Mexico’s government approved a new mining law that shortens the maximum concession length to 30 years, down from 50 years. Other requirements include the return of some profits to local communities.

Commodities are important to Mexico — it’s the world’s top producer of silver, as well as a big producer of gold and copper. However, the current president has taken a tough stance on mining since taking office in 2018. He hasn’t issued any new concessions in that time, which critics have argued is hurting the sector. He’s also nationalized Mexico’s lithium industry.

Many Canadian mining companies operate in Mexico, and the country’s trade minister expressed concerns about the new law before it got the green light. On the flip side, Mexico has called out foreign miners for practices that negatively impact the environment, and for failing to support those living in close proximity to mining operations.

Want more YouTube content? Check out our expert market commentary playlist, which features interviews with key figures in the resource space. If there’s someone you’d like to see us interview, please send an email to cmcleod@investingnews.com.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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