Monsters of Rock: CBA the latest bank to forecast US$3000 gold

Its latest record is still fresh, but gold prices could leap even higher as interest rates slide and the US dollar falls, the Commonwealth Bank says.

Gold's breaking more records than Mondo Duplantis this year. Pic: Getty Images

• Gold shaping as the colour of the Aussie summer as bullion hits new record

• LBMA price hits US$2712.50/oz, US$3000/oz 'in sight next year', says CBA's Vivek Dhar

• Bellevue up on solid quarterly, MinRes down on Ellison reports

It's been a golden spring, with the brilliant yellow of bullion replacing Charli XCX's brat green as the colour of 2024.

LBMA gold prices crossed the bridge to $US2700/oz and above, surging to $US2712.50/oz as the sun set in the north on Friday.

That's around $4040/oz in Aussie dollar terms, yet another record for the yellow metal to chalk up in a year full of them for the safe haven commodity.

Its performance this year has been not unlike the great Swedish pole vaulter Mondo Duplantis, famously incentivised by sponsor's bonuses to break his own world record in the smallest possible increments.

But there's more to come if analysts are to be believed.

Argonaut this month joined Bell Potter and Shaw and Partners in tipping  that $3US000/oz was on the cards.

Bank of America's Michael Widmer went bullish on gold last week, also tipping the mark could be hit in 2025.

Now Commonwealth Bank is joining the party.

Resources expert tips bullish gold outlook

Today's punt comes from the pen of Aussie resources guru Vivek Dhar, Commbank's metals and mining expert, who thinks gold futures will fly to $US2800/oz this quarter as the greenback falls.

By Q4 next year, $US3000/oz is on the agenda.

And Dhar says CBA sees "upside risks" to its outlook given it's already found support this year in tough market conditions.

The inverse relationship normally seen between gold and the US dollar was broken against the backdrop of numerous wars with geopolitical implications as safe haven demand took up the candle from the macro backdrop.

Gold is already up 31 per cent this year, with the question now how a recently commenced rate cutting cycle will support a commodity already propelled upwards by conflict in the Middle East and a pivotal US Election.

"The prospect of looser monetary policy in most advanced economies around the world has further prompted gold futures higher," Dhar said in his note.

"Lower interest rates, particularly in the US, typically reduce the appeal of fixed income assets relative to precious metals.

"The potential weakening of the US dollar from further reductions in the Fed Funds rate has emerged as a key positive driver to watch for gold prices.

"The question for the market is how high gold can go given the price momentum so far this year."

According to Dhar, if the year is broken down into smaller periods, the inverse relationship collapsed on nearly half the days of 2024 but held true in the other periods. Of the periods when the relationship hold steady, the gold price rises were stronger in magnitude than the fall.

"These outcomes, in aggregate, highlight how the negative relationship between gold and the US dollar holds up better when the US dollar weakens, but is less reliable when the US dollar strengthens," Dhar said.

"Therefore, any anticipated weakness in the US dollar is likely to translate through to higher gold prices and not vice versa.

"Based on gold futures continuing to respond positively to a weaker US dollar and our view of the US dollar weakening further, we see gold futures rallying higher until the end of 2025."

But CBA is less positive on safe haven demand, saying recent rises in the volatility index hasn't corresponded to big upwards moves in gold.

Speaking of gold

Not many companies on the reporting calendar  on Monday, but goldie Bellevue Gold (ASX:BGL) set the pace with a near 6 per cent rise after surprising to the upside on its first quarterly 2024-25.

The Bellevue mine delivered 35,993oz of gold, selling 39,405oz at an all in sustaining cost of $1892/oz. BGL pulled in average selling prices of $3420/oz.

The company plans to produce 165,000-180,000oz this year, weighted to the back end of the year with a 200,000ozpa runrate tipped in Q4.

Free cash flow came in at $11 million, strongly beating consensus Q1 forecasts of $30m, while costs were 6 per cent below consensus, setting the company to make a run for full year cost guidance of $1750-1850/oz as production ramps up.

"Key Q1 takeaways are better than expected operating costs and cash flow," RBC's Alex Barkley said.

"Today’s cash flow beat should help allay some shorter-term concerns while BGL unlocks the longer-term potential of the mine."

BGL frustrated investors with a capital raising during the quarter, designed to retire some of its debt and unlock capital to invest in growth and exploration to lift output by 2028 to 250,000ozpa.

South32 (ASX:S32) was largely unchanged as it maintained FY25 guidance across its operations. A 7 per cent drop in output at Worsley Alumina came amid maintenance and bauxite supply constraints.

Approvals to mine new bauxite deposits are expected to be considered by WA's environment minister in December.

Copper output at Sierra Gorda rose 10 per cent though zinc equivalent output at Cannington in Queensland (a major silver and base metals producer) fell 34 per cent due to ground conditions which delayed a high grade stope.

An initial $US100m payment was received from insurers by South32 and Anglo American for their GEMCO manganese operations, which were suspended due to a cyclone earlier this year.

MinRes muddle

On the other side of the ledger, Mineral Resources (ASX:MIN) shares fell over 13 US after reports over the weekend that boss Chris Ellison and a number of unnamed executives had reported themselves to the Australian Taxation Office for historic tax evasion.

The reports also contained information about "payments made by MinRes to offshore entities connected with Mr Ellison related to pre-IPO sales contracts that were recognised as liabilities in the company’s financial statements at the time." The lithium and iron ore miner listed in 2006.

MinRes shares tumbled as its board announced it had "engaged external legal counsel to conduct an investigation into this matter and advise the Board."

Ellison, who owns more than 10 per cent of the miner, is said to have cooperated with the investigation into the matters reported and expressed regret for "errors of judgment," with the board expressing its full confidence in its managing director and founder.

"As to his private tax matters, Mr Ellison self-reported to the Australian Taxation Office, repaid amounts owed and disclosed these matters to the board. While this does not diminish what happened, Mr Ellison profoundly regrets his errors of judgment," MinRes said in its statement.

"The board today comprises directors who individually and collectively have a strong focus on governance and are committed to continuous review and improvement. The Board has full confidence in Mr Ellison and his leadership of the MinRes executive team."

RBC's Kaan Peker said the sell-off appeared  "overdone" and that there didn't appear to be any immediate impacts on the company's operations and management.

"While we understand that these concerns raise questions over corporate governance, we think the share price move today is overdone. The added scrutiny and rigour, the current concerns placed on corporate governance, ultimately, should be positive for the organisation, and at face-value there appears to be no adverse impact to operations/management," he said.

Delta Lithium (ASX:DLI), chaired by Ellison, was also down 4.2 per cent.

Goldies unsurprisingly led the gains, with uranium companies also sharply higher, as the materials sector lifted 1.44 per cent.

Making gains

Genesis Minerals (ASX:GMD)  (gold) +7.4 per cent

West African Resources (ASX:WAF) (gold) +7.2 per cent

Boss Energy (ASX:BOE) (uranium) +6.2 per cent

Ora Banda (ASX:OBM) (gold) +6.2 per cent

Eating losses

Mineral Resources (ASX:MIN) (lithium/iron ore) -13.8 per cent

Alpha HPA (ASX:A4N) (HPA) -3.1 per cent

Wildcat Resources (ASX:WC8) (lithium) -2.8 per cent

Metals Acquisition (ASX:MAC) (copper) -1.3 per cent

At Stockhead we tell it like it is. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.