The price of gold closes the second week of the year just below $1,920 an ounce.
The yellow metal was last above $1,900 in April 2022, after which it began a bumpy decline that continued through the summer and fall. A turnaround started in early November and gold has rallied around $300 since then.
This increase has come despite the fact that the US Federal Reserve remains strong in its fight against inflation. The central bank has repeatedly indicated that it plans to continue raising interest rates, which tends to be a negative for non-interest-bearing assets like gold.
However, many market participants believe the Fed will reconsider, and the latest reading of the Consumer Price Index, released on Thursday (Jan 12), has added force to that argument. The data shows a year-on-year price increase of 6.5 percent in December and a decrease of 0.1 percent compared to the previous month, in line with consensus estimates.
Frank Holmes of US Global Investors (NASDAQ:GROW) is an expert who believes the Fed will have to relax.
“I remain extremely bullish on gold as an asset class. They can’t raise rates much higher this quarter without having a very tragic global recession. And I think there will still be negative real interest rates,” he said.
He suggested that investors look at small- and mid-cap gold stocks ahead of any potential jump in the gold price.
Sweden’s LKAB finds Europe’s largest rare earth deposit
This week also brought news from the rare earth market, a sector that we don’t usually cover at INN.
Swedish state mining company LKAB announced on thursday which has found the largest rare earth deposit in Europe. Called Per Geijer, a mineral resource for the asset shows that it contains more than 1 million tonnes of rare earth oxides.
“This is the largest known deposit of rare earth elements in our part of the world, and could become an important component for the production of critical raw materials that are absolutely crucial to enable the green transition,” said Jan Moström, president and CEO of LKAB. group executive director. “We are facing a supply problem. Without mines, there can be no electric vehicles.”
Rare earths are important in a host of high-tech applications, and electric vehicles are becoming a key source of demand as they gain ground on a global scale. With consumption of these critical metals increasing, countries around the world are looking to diversify away from China, which has long dominated rare earth production and processing.
Although its dominance has weakened in recent years, the US Geological Survey pegs China’s 2021 production at 168,000 metric tons, well above the second-place US output of 43,000 metric tons.
Europe does not produce rare earths at the moment, and LKAB stresses that while Per Geijer’s discovery is significant, bringing the project to production will take time. Moström said in the company’s press release that he doesn’t see that happening for 10 to 15 years, unless Europe takes steps to speed up the permitting process.
At the same time, the region will need to increase its processing capacity.
“So we also need to focus on the entire value chain of these metals, products like high-efficiency magnets that we want to use for wind turbines or traction motors in (electric vehicles) and so on,” Erik Jonsson, senior geologist at Geological Survey of the Swedish Department of Mineral Resources, told Reuters.
For now, LKAB’s first step will be to apply for a mining concession, which will allow it to undertake further exploration of the deposit. The company plans to submit its application later this year.
LKAB is best known as a miner of iron ore, which accounts for 80 percent of the EU’s production of the material. It also sells other industrial minerals and offers various products and services, including drilling solutions, concrete and explosives.
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Securities Disclosure: I, Charlotte McLeod, do not have any direct investment interest in any of the companies mentioned in this article.
Editorial Disclosure: Investing News Network does not guarantee the accuracy or completeness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the views 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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