Greatland Gold (GGP) share price has continued to underperform the market this year, even as gold has soared to its highest level on record. It was trading at 6.30p on Tuesday, where it has been stuck at in the past few months, and 45% below its highest point this year.
Gold prices have soared
Gold has been in a strong bull run this year, helped by three key factors. First, global central banks have started cutting interest rates this year, a trend that may continue in the foreseeable future.
The Federal Reserve slashed rates by 0.50% in its last meeting, and analysts expect that it will deliver two 0.25% cuts in November and December.
Other central banks like the Bank of Canada, Bank of England, and the European Central Bank have continued cutting rates. Gold often does well when interest rates are in a strong downward trend.
Second, retail investors in countries like India, China, and the United States have continued buying gold. In the US, most of this gold is being bought in Costco, the biggest wholesale company in the country.
In China, many retail investors allocated cash to gold as the real estate and stock market sectors continued to underperform. Similarly, in India, many people are buying gold as a means to diversify their wealth.
Global central banks have continued to accumulate gold in the past few years as a way of diversifying their reserves. Some of the most notable buyers were central banks in China, Russia, and Kazakhstan.
Third, gold has become a good hedge against the soaring global debt, led by the United States. Data shows that the country’s public debt has risen sharply in the past few months, and currently stands at £35.8 trillion.
As a result, analysts believe that the US could move into a major fiscal crisis in the coming years since Kamala Harris and Donald Trump have no real plans to fix the debt issue. Even if they had a plan, implementing it through Congress would not be easy.
Read more: The $35-trillion elephant in the room: US debt is sinking America
Greatland Gold is a speculative gold company
Many investors interested in gold have also allocated cash in mining companies. Broadly, this approach has not worked out well as gold has continued to do better than the VanEck Gold Miners ETF (GDX).
Greatland Gold is a company that has the potential to become a big player in the mining industry.
Valued at over £700 million, GGP is a company that holds a 30% stake in a big project in Australia known as Havieron. The other part of the transaction is Newmont Corporation, the biggest gold mining company in the world.
The Havieron project is known for its potential for long life because of the substantial amount of gold and other resources. It has also become the second-biggest undeveloped gold project in Australia after Hemi. Its resources are about 8.4 million ounces of gold equivalent. Going by the current gold price, the amount of gold is worth about $22.6 billion.
Greatland Gold has made several major announcements in the past few weeks. The most important one is the decision to buy 70% of Havieron and 100% of Telfer from Newmont in a $475 million deal.
After it enters production, Greatland hopes to produce about 258koz AuEQ or ounces of gold, currently valued at $696 million.
Additionally, with the Telfer acquisition, Greatland will have the smallest mining cost at $818, making it a highly profitable company if gold prices continue to rise.
Greatland Gold share price analysis
GGC chart by TradingView
Turning to the weekly chart, we see that the GGP share price peaked at 38.50p in January 2021 and has bottomed at 5.42p.
Most recently, the stock has formed a descending triangle pattern, whose lower side at 5.42p. In most periods, a descending triangle is one of the most popular bearish signs in the market.
Greatland Gold has moved below the 50-week and 100-week Exponential Moving Averages (EMA).
Therefore, a break below the support at 5.42p will point to more downside, with the next point to watch being at 4.50p.
On the other hand, a move above the upper side of the triangle pattern will point to more gains, with the next point being at 11.60, its highest level this year, implying a 825 upsides. This means that it has attractive risk-reward metrics.
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