Gold having the biggest drop in over 12 years: Analyst

About this video

• Video Title: Gold having the biggest drop in over 12 years: Analyst
• Channel: BNN Bloomberg
• Speakers: Not explicitly named, but an analyst is interviewed.
• Duration: 00:05:44

Overview

This video discusses the significant drop in gold prices, which experienced its largest decline in over 12 years. An analyst provides insights into the factors contributing to this pullback, the long-term outlook for gold, and investment strategies within the precious metals sector, including a specific rating upgrade for Franco Nevada.

Key takeaways

• Significant Gold Price Drop: Gold experienced a more than 6% decline, marking the worst drop since 2013. This followed a record high reached on Monday.
• Contributing Factors: The pullback is attributed to profit-taking after a rally, easing US-China relations, and a stronger US dollar.
• Long-Term Fundamentals Remain Strong: Despite the short-term correction, the underlying fundamentals for gold are considered strong due to factors like Fed interest rate cuts, a slowing labor market, high US debt levels, and continued central bank gold purchases.
• Gold vs. Dollar: The analyst posits that gold's value will increase in the long run due to the increasing supply of dollars compared to the slow increase in gold supply.
• Investment Recommendation: The analyst upgraded Franco Nevada (a royalty company) from "hold" to "buy," viewing it as a safer way to invest in the gold sector with a more reasonable valuation after the recent pullback.
• Sector Health: The gold mining sector is seen as being in a much better financial position compared to previous cycles, with companies having strong balance sheets, paying down debt, and generating free cash flow.
• TSX Impact: The gold sector's significant weighting on the TSX means its performance heavily influences the Canadian market, though the gold industry itself is global.