Chart, page-197

This is an extract from the SMH today from an article on gold and Bitcoin. The items to note are in bold. Euroz Hartley's seem very confident that miner's costs have come down which will be apparent from the March quartiles, and that will translate into increased profits and cash flow for miners which will flow into a rerate of gold miners share prices for the larger mines and then flow into a re-rate of smaller producers and explorers. My view is that lower costs will more likely show up more in the June quarter than the March quarter.

While SPR is not a producer but more a developer, we may see a re-rate of SPR SP after the re-rate of gold producers over the next 3-6=12 months assuming costs do come down.

Both Euro Hartley's and ANZ have noted that ETF's buying is lagging POG's rise which is a drag on the POG. If that does change the POG will probably move higher but the price gain will be determined by the extent of ETF buying both quantity and length of time. Of note is that for the first time in quite a while North American were net buyers of gold ETF's in the second week of March but Europe were still net sellers (see World Gold Council data which publishes weekly data on ETFs) - this may be an early sign that ETF's may be about to start being net buyers of gold but in my view its too early to form a view that ETF's are going to be net buyers for a sustained period (ie at least for 6 months).

"Michael Scantlebury, a resource analyst at Perth-based ASX listed broker and investment bank Euroz Hartleys, says the share price of Australia’s gold producing miners and ASX-listed gold-focused exchange traded funds are lagging gold’s soaring price.

“It doesn’t make any sense, right? We aren’t too surprised, given the lack of interest over the last three years in the gold equities,” he says.

Gold’s last big run started after the pandemic’s mayhem primed the world’s latest inflationary surge, but investors who expected gold miners’ profit margins to follow the gold price upwards were disappointed.

“Cost inflation for gold producers basically squeezed that margin to the point where gold producers were breaking even, essentially, despite the gold price increases,” Scantlebury says.

Gold equities in Australia underperformed as a result, and investors still remain sceptical. However, Scantlebury says discussions with mining contractors and industry suppliers shows pressures are easing, be it wage rises or fuel prices.

“The rate of cost inflation has definitely come off, so we’re very confident that this gold price increase will convert to proper margin and proper cash flow,” he says.

That’s a shift Euroz Hartleys expects to show up in the March quarterly reports of miners like Northern Star Resources, Evolution, Ramelius, Perseus, West African and Gold Road Resources. Euroz Hartleys would expect investors to then focus on smaller producers and explorers after a re-rate in these larger miners occurs.

“Assuming the gold price stays equal, gold producers in Australia should definitely re-rate,” Scantlebury says.

ANZ commodity strategists Daniel Hynes and Soni Kumari said gold’s latest rally isn’t being derailed by the market’s expectation that the Fed may push back expected cuts in interest rates, delaying a move that would signal it has US inflation under control.

“While speculators have increased their bullish bets recently, positions are not matchinWg the intensity of the latest price rally. Moreover, disinvestment in gold-backed exchange-traded funds has been continuing,” they said in a research note last week."