Driven by uncertainties regarding the Trump administration's policies, gold hit its highest level on the London Bullion Market in the last two months on Monday. It was $1,213.75 per troy ounce.
Source: Kitco.com
The bullion for immediate delivery closed at $1,213.30 per troy ounce on Monday, a jump of 45 cents or 0.04% from the previous close.
There is no doubt gold investors are taking advantage of a weaker U.S. dollar versus other currencies that, as shown in the table below, Â are downtrending at an average rate of 12.83% since the beginning of 2017.
Source of data: Investing.com
Currently, the U.S. Dollar Index (DXY) is trading at $100.32, up 16 cents or 0.16% from the previous trading day. The price is close to its lowest price of $99.90 over the last 21 trading days.
A weaker dollar is also pushing the price of the February gold future higher.
Gold Futures (GCG7) is trading at $1,212.85 per ounce, down $2.75 or -0.23% from the previous close, a small retracement after having hit the highest price of $1,218.35 per ounce at the beginning of the new year.
Source of data: Investing.com
The Gold Futures has been uptrending since the beginning of the new year, as shown by the graphic above. The price of the contracts through which gold is traded on the Comex jumped 12 times out of a total of 18 changes and the average is $1,191.50 per ounce.
Another way to gain exposure to changes in the gold price is through investments in the gold stock industry. Sucden Financial Research (see Kitco.com) forecasts gold will not trade over $1,250 per ounce during the first half of 2017. Therefore, it is wise to invest in a gold mining company that can economically mine the precious metal at the lowest price per ounce.
One of these gold producers is Barrick Gold Corp. (ABX, Financial). The world’s largest gold producer has defined its gold reserves at a price of $1,000 per ounce, the lowest in the industry.
Another gold stock to take into consideration for 2017 is Yamana Gold Inc. (AUY, Financial). The mid-tier gold producer has defined its proven and probable gold reserves at a price of $1,150 per ounce. However, its gold margins could be deeply impacted during the second part of the year if the Federal Reserve proceeds to increase the interest rates two more times as announced in December.
Barrick Gold closed at $17.82 per share on Monday and has gained 11.51% year to date. It is trading at 2.76 times the book value and at 6.40 times the Ebitda.
Yamana Gold closed at $3.30 per share on Monday, up nine cents or 2.8% from the previous trading day. The stock is trading at 0.64 times the book value and at 8.28 times the Ebitda.
Disclosure: I have no positions in any security mentioned in this article.
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