Gold is climbing again in August after giving back some of its earlier gains, with weaker U.S. economic data and a softer dollar working in its favor. Royal Gold, a streaming and royalty company tied to gold, silver, and copper, posted a 56.5% jump in second-quarter revenue as the metals rally lifted its business.
Gold hit new all-time highs earlier this year before pulling back in recent months, and it has started climbing again in August. Analyst Matthew Benjamin points to shifting U.S. economic conditions and years-long central bank buying as the forces now working in the metal's favor.
Weaker data and a softer dollar favor gold
The metal moves on macroeconomic factors such as inflation, currency swings, and monetary policy rather than industrial demand. Weaker U.S. economic data, including a poor July employment report, suggest the Federal Reserve will wait before hiking its target interest rate, a dynamic that favors gold since it cannot compete with interest-producing assets. The U.S. dollar has also weakened against other major currencies, which makes gold cheaper for international buyers.
Central banks have added a further layer of demand. Since Russia's 2022 invasion of Ukraine and the U.S. response of freezing Russia's foreign exchange reserves, many central banks worldwide have been stocking up on gold to diversify away from the dollar, an ongoing trend that has bolstered the metal's price in recent years.
Royal Gold's results track the rebound
Royal Gold, a Denver-based company that acquires metal streams and royalty interests rather than operating mines, posted second-quarter revenue that rose 56.5% to $450 million, with earnings of $2.56 a share, 41% higher than a year earlier, though both figures missed estimates by a hair. The company reported record operating cash flow of $335.2 million, more than double the year-ago figure. Gold accounted for 76% of Royal Gold's second-quarter revenue, with silver contributing 12% and copper 8%.
Silver and copper have also been surging in fits and starts since late 2023, a trend Benjamin attributes to growing demand from AI data center construction combined with a sluggish pace of new supply. Royal Gold's stock is up 31% over the past month as the metals rally has fed through to its results.
Source: The Motley Fool
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