Van Eck Global reports that gold companies reported mixed results for the first quarter of 2015 with some companies beating earnings and operating expectations, while others disappointed.
The firm says that many of the companies that failed to meet expectations maintained their 2015 full year guidance, targeting improved results in the second half of the year.
“Overall, the trend appears to be for lower operating costs this year, with many companies reporting lower than expected costs in the first quarter” the firm says.
Looking forward, Van Eck estimates that the gold price is mostly reflecting the market’s expectations for the timing of the next federal funds rate increase as dictated by the conditions of the US economy. “In the short term, we expect gold to continue to trade
sideways around the USD1,200 level as these expectations change based on updated US economic indicators. Later in the year, if the Fed raises rates, the performance of gold will likely depend on how the U.S. economy responds to the rate increase and whether
it can withstand it. If the Fed does not raise rates, we believe this would signal a turning point for gold and potentially the beginning of the next gold rally.”
In the longer term, Van Eck believes that imbalances continue to build in the global financial system with the potential to threaten its stability, which we expect would ultimately drive investors seeking protection to gold and gold shares.
“In our view, although it may take higher gold prices to get the M&A wheels of the sector really turning, those companies with the capacity to execute value creating deals today are in a privileged position, presenting a potential opportunity for investors.”
