Altius Minerals (OTC:ATUSF) and Franco-Nevada (NYSE:FNV) attract investors with gold opportunities

Source: Adrian Day 04/10/2024

Global Analyst Adrian Day looks for signs that investors are finally turning to gold, and provides an update on developments at a couple of stocks on his list.

Central Bank Buying Continues to Drive Gold Prices

Over the past four weeks, gold prices have risen by $150, building on the momentum gained from a $190 increase in the previous month. Central bank buying remains a major driver behind the increase in gold prices. However, there are increasing indications of a shift in interest from institutional and retail investors towards gold, potentially propelling the price even higher.

Recent reports on various gold buying avenues show that central banks have been actively buying gold, with almost 19 tonnes of net buying reported so far. Notable buyers include China, the Czech Republic, Kazakhstan, Qatar, Turkey, and Mauritania, offset by a significant sale from Uzbekistan. This trend, although strong, represents a slowing compared to the previous two years.

Retail Buyers Lagging Behind

Anecdotal evidence suggests that there has been a slight shift towards buying gold in recent weeks among retail customers, although coin dealers still report neutral to weak sales. On the other hand, gold ETF flows have shown some fluctuation, with recent inflows on specific days as gold prices surpassed $2,300. Despite these inflows, overall ETF selling has continued this year.

It appears that retail and institutional investors are not the primary drivers of the current gold price surge.

Wealthy Families and Institutions Driving Gold Demand

There seems to be a new source of demand for gold, primarily from wealthy families and institutions in the Middle East, Asia, and Europe. These buyers are likely seeking gold as an insurance asset against financial instability. Gold’s resilience in the face of typically adverse factors like a strong dollar and high interest rates indicates a different type of demand from traditional investors.

Anticipation of potential Federal Reserve rate cuts also favors gold, as investors sense a looming rate cut due to economic conditions. Despite recent indications of a more hawkish stance from the Fed, gold prices have continued to rise.

Gold Stocks and Silver Outperforming Gold

Interestingly, gold and silver stocks have outperformed gold itself in recent weeks, signaling increased market strength and investor interest. This outperformance could be an early indicator of a potential shift in assets towards gold equities, leading to significant gains if the trend continues.

Recent Developments in Gold Stock Investments

Franco-Nevada Corp. FNV made a small royalty purchase from Scottie Resources in British Columbia. This acquisition, along with equity investments, demonstrates a strategic shift towards smaller transactions in the current market environment.

Altius Minerals Corp. ATUSF faced a setback in its takings claim over a royalty, but the impact on the company’s share price is believed to be minimal. Altius continues to offer broad exposure to commodities and remains a core holding.

In addition to the above, Adrian Day’s top buys this week include Nestlé SA NSRGF, Gladstone Investment Corp. GAIN, and Orogen Royalties Inc. OGNRF.

In conclusion, while central banks and wealthy investors are driving the recent surge in gold prices, a potential shift in interest from retail and institutional investors could lead to explosive movements in the coming weeks. The performance of gold stocks and silver compared to gold itself also hints at a strengthening market, signaling opportunities for investors to capitalize on the shift towards gold assets.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Franco-Nevada Corp., Altius Minerals Corp., and Orogen Royalties Inc.
2. Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: All. I determined which companies would be included in this article based on my research and understanding of the sector.
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