Happy Financial New Year! As the dawn breaks on another 12 months of economic activity, few industries (and indeed investors) will be as keen to see a fresh start as Australia’s gold miners.
Twelve months after the largest fall of gold prices in decades, miners like Newcrest Mining Limited (ASX: NCM), Silver Lake Resources Limited (ASX: SLR) and Regis Resources Limited (ASX: RRL) will this year be wishing for the prospect of higher gold prices and an easing in cost inflation.
For gold investors weighing up if current share prices represent a New Year’s bargain, there are three important things you must know today:
1. India’s import restrictions on gold are expected to ease
After adopting harsh measures to restrict the import of gold in 2013 in an attempt to curb the country’s current account deficit, a new Indian government has indicated it is willing to do away with the restrictions.
This could result in an increase in gold demand from India, the world’s second largest buyer of the metal, which saw a notable drop in volume after the restrictions were put in place.
2. Slowly, but surely, the Federal Reserve is reducing bond-buying
It hasn’t happened overnight, but it is happening. The bond-buying programme by the U.S. Federal Reserve has progressively eased from US$85 billion to US$35 billion a month.
This signals the Fed’s confidence in the improving strength of the U.S. economy, and may limit on demand for gold as an inflation hedge.
3. June quarter gold production is likely to rise for many miners
After declining production in the March quarter due to a range of seasonal factors, many of Australia’s big miners will be expecting an improvement in production to cap off the year. EVOLUTION FPO (ASX: EVN) will be one company in particular to watch, with the company expecting production to bounce back.