Iran Instability Sparks Rally In Gold

By Glenn Dyer | More Articles by Glenn Dyer

Donald Trump has ensured gold has started 2020 with a bang with the strike against the leader of Iran’s Revolutionary Guards which has triggered a surge in global tension and commodity prices led by oil and especially gold.

Comex gold futures are up more than 3% so far this year in the wake of Trump’s move.

As a result, 2020 has kicked off with a bang for the world’s gold miners (after the 19% surge in 2019) and the world’s biggest gold-mining company says it will reward shareholders who stuck by it in a bruising brawl with a major rival in 2019.

On Monday (January 6), Newmont Goldcorp revealed plans to increase its dividend by 79% to $US1 per share. The increased dividend will become effective upon approval and declaration of the first-quarter dividend in April 2020, the company said in a regulatory filing.

“We are pleased to announce a planned increase to our annualized dividend by 79% to one dollar per share and will continue demonstrating our disciplined approach to capital allocation and the confidence we have in our business to deliver substantial future cash flows and returns for shareholders,” said Tom Palmer, Newmont CEO, in the statement.

“Our first-quarter dividend will offer investors a highly competitive dividend yield and enhanced returns from owning shares of the world’s leading gold company.”

The dividend increase comes after the Newmont repurchased 12.4 million shares in the fourth quarter. The company said that last year it returned $US1.4 billion to shareholders in buybacks and dividends.

Newmont has benefited not only from its renewed focus on shareholder value, but from the best rally in gold prices in nearly 10 years.

In 2019 Newmont saw a 25% increase in its share price as gold prices rallied 18% for the year, pushing above $US1,500 an ounce where remains in the second week of January.

But perhaps the most important reason for the dividend lift the promise of improved returns for shareholders in the brutal takeover defence against rival Barrick’s $US18 billion offer in 2019.

Australia’s global gold major, Newcrest, saw its shares surge 38% in 2019, even though it prices its sales in US dollars.

The shares lost more than 12% of its value in the final three months of as the Aussie dollar edged higher against the greenback and topped 70 US cents at the end of the year.

The company’s costs are mostly incurred in Aussie dollars and PNG Kina, plus some greenbacks, so the weakness of the Aussie against the greenback meant costs were not a huge concern last year for Newcrest.

Newcrest shares are up 2.8% so far in 2020.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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