Gold as a defensive investment remains a key theme. We take the view that market shockwaves related to the Coronavirus (COVID-19) pandemic will continue to feed into an almost perfect storm for gold near term. The US Fed has announced a QE bazooka consisting of “unlimited asset purchases”, similar to that seen in 2008. Futures contract volatility, the short supply of physical metal and uncertainty leading into a US Presidential election, will all serve to underpin a risk-off environment beneficial to gold prices. We believe that the “G-5” (the core group of five +300kozpa mid-tier gold producers – NST, SAR, RRL, SBM and EVN) will continue to attract investors, thanks to their diversified assets, high free cash generation, predictable production and nimble M&A. With mine suspensions a real risk, given closures in South Africa and Canada, we analyse the potential for selective ASX miners to continue operations. This could be by either processing stockpiles or via running isolated mine sites.
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