Mount Magnet gold mine in Western Australia, owned by Ramelius Resources. Australian gold price and company shares are surging on the low dollar and US interest rates.
Australian gold miners are reaping the benefit of a low Australian dollar as the price soars.
The precious metal is currently $1,620 a troy ounce.
That is driving up share prices, and companies are working around the clock to keep up production.
The physical gold markets have been a bit chopped and changed this year
ANZ Bank precious metals analyst Victor Thianpiriya said uncertainty over whether the US Federal Reserve would raise rates also was a big factor in the rise.
“We had a big run up in the US dollar in 2013 and 2014, but that rally has stalled over the past few months,” he said.
“And now people are seriously considering whether the US Federal Reserve can raise interest rates in 2015 at all.
“Until we get some further clarity on the direction for the Fed, we’re likely to see, in US dollars, gold trade in the US$1,150 range.”
Unlike other metals and bulk commodities such as coal, iron ore and copper, where price is determined by supply and demand fundamentals, the gold price is as much a factor of market sentiment as demand and exchange rates.
In its just-released gold market report, ANZ found market sentiment for gold as a store of wealth was bullish, even while physical demand had come off in the past few weeks.
“The physical markets have been a bit chopped and changed this year,” Mr Thianpiriya said.
“September was very strong, particularly from China which is the world’s largest importer of gold.
“That was just prior to the Golden Week holiday, but now the market is suffering from a bit of indigestion as there was a lot of gold bought in September and that’s being worked through.”
Mr Thianpiriya said the second-largest buyer of gold, India, was much weaker after a recent buying spree.
“We saw some very, very strong import figures into India in July and August, and the market in India is now trading at a discount to the global price,” he said.
“That’s a very unusual situation and it just shows that there is still a lot of stock onshore in India to wash through.”
Local miners make most of strong gold price
The dramatic drop in the Australian dollar against the greenback has come on the back of a flurry of acquisitions by local miners after large US corporations divested many gold operations.
However, this morning it has been revealed Australia’s largest gold mine at Boddington in Western Australia, owned by US company Newmont, is to be expanded.
You don’t wish ill on the economy but a high dollar is probably the worst thing for gold
And Australian-based companies have been quick to take advantage of the positive market conditions that have dramatically driven up share prices across the board.
Gold miner Ramelius Resources is one of them, and managing director Mark Zeptner said the company also had benefited from cost cutting measures over the past few poor years.
“You’ve got to be more efficient with the low grade material, things like running gold mills at low operating costs,” Mr Zeptner said.
“It’s also concentrating on every part of your business input costs, such as basics like reagents.
“We’ve also benefited from lower oil and gas prices.”
But it is very much the low exchange rate that is working in the favour of local gold miners.
Mr Zeptner said companies were making the most of the current conditions and hoping the dollar stayed around the 70 cents US mark.
“Not that you wish ill on the economy, but that’s probably the worst thing for gold,” he said.
“If it was really strong again, or back to parity, there would be a lot of operations struggling.”