Coronavirus-Driven Gold Prices & Weak Oil: Win-Win For Miners
Zacks Investment Research | Mar 11, 2020 09:23PM ET
The coronavirus crisis has led to surging gold prices on the back of demand for safe-haven investments. Gold prices are currently at $1,635.31 an ounce, yielding a year-to-date return of 8%. The plunge in oil prices sent gold shooting above the level of $1,700 an ounce on Mar 8 —levels last seen in December 2012. The combination of higher gold prices and lower oil prices, which make up significant portion of a miner’s costs, will translate into improved operating margins and higher free cash flow for miners.
Global Oil Price War
Saudi Arabia slashed its official selling price, and boosted its oil production significantly in retaliation to Russia’s refusal to lower its crude production at the OPEC meeting. This triggered the steepest drop in oil prices since the 1991. The state-owned producer, Saudi Aramco (SE:2222), recently announced it would raise the maximum production rate to record highs of 13 million barrels a day. The United Arab Emirates' state-owned Abu Dhabi National Oil Co. followed suit and plans to raise production to 4 million barrels per day in April. Notably, oil prices were already under pressure due to the coronavirus outbreak, which led to travel restrictions and consequently impacting demand for fuel.
On Mar 11, Brent oil futures were down 3.8% to $35.79 per barrel, losing 48% so far this year. Crude oil was at $32.98 per barrel on Mar 11, down 4% in a day and 48% year to date.
Coronavirus Declared a Pandemic
The World Health Organization (WHO) has officially designated the Zacks Investment Research
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