By Dave Brown — Exclusive to Gold Investing News
The price of gold declined this week following a drop in the euro and a rate decision from the European Central Bank. The week also included increased yields at a debt auction, which created apprehension regarding Spain’s financial solvency. Falling over the course of the week, spot market gold prices were trading in the range of $1,634.80 per troy ounce. This represents a decline of about 1.5 percent.
In the United States, about 365,000 individuals filed initial claims for jobless benefits, a considerable drop from the 392,000 claims filed last week and ahead of consensus forecasts of 375,000. Jobless claims are widely thought to be a proxy metric for the overall job market, and generally strongly correlate with the number of layoffs in the economy.
For investors, a positive result for the US employment market on Friday will likely restrain further speculation that the Federal Reserve will initiate additional quantitative easing, a prospect that is considered a catalyst for gold appreciation.
Supply concerns could support gold price growth
Nancy Curtin, Chief Investment Officer for Close Brothers Asset Management, discussed gold price volatility with CNBC, commenting, “if you look at the gold market a lot of the speculative interest has come out. It is actually basing quite nicely. We would like to see a close over $1,690 [per troy ounce] to begin to indicate a more positive trend. All these earnings [reports] indicate production problems. Production problems mean less gold on the market. Less gold on the market is supportive of the gold price.”
Barrick Gold Corp. (TSX:ABX) reported first quarter adjusted earnings per share of $1.09, slightly below consensus estimates of $1.11. The company benefited from a 22 percent increase in gold prices as well as better copper sales. Barrick is reviewing cost estimates for its $5 billion Pascua-Lama gold and silver project on the border of Chile and Argentina because of inflationary impacts on labor and materials. On a positive note, Barrick raised its dividend by 33 percent to $0.80 per year and maintained its full-year guidance of between 7.3 million and 7.8 million troy ounces of gold and between 550 million and 600 million pounds of copper.
Yamana Gold Inc. (TSX:YRI,NYSE:AUY) announced its first quarter results, which included adjusted earnings of $0.25 per share. Top line revenue increased 18 percent to $560 million from $476 million during the first quarter of last year. Yamana anticipates production targets for the year to be in the range of 1.2 million to 1.3 million gold equivalent ounces, a 13 percent increase from last year.
Goldcorp Inc. (TSX:G,NYSE:GG) suspended construction of the El Morro gold and copper mine following the rejection of the $3.9 billion project’s environmental permit by Chile’s Supreme Court. Earlier in the spring the company indicated that it would continue developing the project unless Chile’s Supreme Court upheld a decision by the Antofagasta Court of Appeals. Non-construction work on the project is expected to continue.
Newmont Mining Corp. (TSX:NMC,NYSE:NEM) may have to raise the $4.8 billion budget for its Conga project in Peru after political opposition. Newmont is currently in the process of evaluating the project’s economics with the potential to redistribute capital resources to other development alternatives in Nevada, Australia, Ghana, and Indonesia.
Investors will be interested in these developments as escalating costs could indicate that producers will be reassessing additional proposed projects with more careful consideration. Such attention could impact exploration budgets and merger and acquisition activity.
Junior company news
Northern Vertex Mining Corp. (TSXV:NEE;OTCQX:NHVCF) added a second diamond drill rig to its current program at its Lemhi gold project and is waiting for the first round of results from its initial phase of drilling.
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.