Precious Metals

Gold on Thursday was lower than it started the week, as bullion investors eye next week’s Fed meeting with some trepidation.

Gold market participants have their sights firmly fixed on next week’s meeting of the U.S. Federal Reserve that is expected to signal the central bank’s position on continued stimulus, as the precious metal rose and fell this week on speculation of the meeting’s conclusion on December 18.

The week started out bullish for gold, with the yellow metal posting modest gains on Monday due to some bargain hunting and short covering, following gold’s rise last Friday due to a bearish U.S. jobs report. February gold futures climbed $5.90 to $1,234.90 while spot gold finished at $1,234.50.

Tuesday was even better for gold, with more bargain hunting combined with a lower U.S. dollar and higher crude oil prices pushing the metal to a 3-week high. Spot gold rose $15.80 to 1,256.75 while gold futures did even better, climbing $21.10 to finish the day in New York at $1,255.20 an ounce.

By Wednesday, however, many gold traders took profits and the metal slipped, with both the spot price and gold futures down to a respective $1,258.25 and $1,257.20. A bipartisan agreement reached late Tuesday on a budget deal that would avoid a government shutdown similar to what occurred in Washington earlier this fall had little impact on the gold market.

Thursday’s gold news was dominated by technical selling and a higher U.S. dollar, which pushed February gold futures down $31.40 to $1,225.80 — almost $10 lower than Monday’s close — while spot gold shed $26.50 to end the day at $1,226.50.

Kitco’s Jim Wyckoff believes that the expected taper of quantitative easing, made more likely due to an improved U.S. economy, is baked into the gold price, meaning a pull-back of the $85-billion a month stimulus program could have a less drastic impact on the price than many anticipate:

“The steady drumbeat of speculation on the precise timing of Fed tapering has done two things to the market place: One, it has numbed traders and investors to the actual event, which is likely to lessen its significance when it does actually occur,” he wrote. “And two, the markets have already mostly factored into their price structures the Fed tapering, when it does occur. The actual surprise to the market place now would be a string of weak U.S. economic data that puts off Fed tapering for several months — but that is unlikely.

North Korea selling gold to China?

Is North Korea selling gold to China? The data is scarce, but according to its neighbor, South Korea, the reclusive dictatorship is selling a large amount of gold to China in order to alleviate an economic crisis. According to Mineweb, “If North Korea is indeed selling its gold to China then this could be considered quite significant – perhaps not quite the economic collapse that some South Koreans would wish on their northern neighbour, but certainly signs of economic difficulties in perhaps maintaining its military might and weapons development programmes, let alone feeding its people.” North Korea is believed to hold gold reserves of 2,000 tonnes and may produce about 8 tonnes a year, wrote Mineweb’s Lawrence Williams.

Company news

Egyptian gold producer Centamin (LSE:CEY,TSX:CEE) will pay AUD$40.9 million to West Africa-focused Ampella Mining (ASX:AMX), in a move to diversify its assets. Centamin’s flagship project is the Sukari mine in Egypt’s Western Desert, but in 2012 the company stopped production due to a dispute with the government over fuel supplies and gold exports. According to Reuters, a court case over its mining license, unrest in the country and a sharp decline in the gold price have wiped out more than half of Centamin’s stock value in 14 months.

Shares in Iamgold (NYSE:IAG,TSX:IMG), a Canadian gold producer, fell nearly 11 percent on Thursday after the company announced it is suspending its dividend to conserve cash. The Toronto-based firm that operates mines in Canada, South America and West Africa, is on track to reduce expenses by $100 million this year — a feat it has achieved by slashing jobs, reducing exploration and overhauling operations, reported The Globe and Mail.

Junior company news

Ghanian firm Blaze Metal Resources Ashanti Ltd (BMRAL) will lead a consortium intending to spend $100 million over the next seven years to explore for gold in Uganda. According to BMRAL, the group of three companies plans to prospect a 23-mile area estimated to contain 2 million or more ounces of gold.

South African company Sibanye Gold (NYSE:SBGL) made a cash offer this week to acquire junior rival Wits Gold, which is developing assets near Sibanye’s Beatrix operations. The 11.55 rand per share offer represents a nearly 45 percent premium on Wits Gold’s closing price on Monday. Sibanye is aiming to produce 1.4 million ounces this year.

Colussus Minerals (TSX:CSI), which has suffered a series of setbacks in advancing its Serra Pelada gold-PGM project in Brazil, said last week it would need $70 million to get to production. In a press release, the company said it would cease underground development in order to complete dewatering and to decrease costs, and is targetting the end of December for completing the resource estimate. In the meantime, Colossus said it is seeking short-term funding.

Brazil Resources (TSXV:BRI) said last week it issued 243,974 common shares at $0.78 per share, to former senior officers, directors and consultants, “in full and final satisfaction of deferred compensation and directors fees,” in the amount of approximately $190,000. On Nov. 22 BRI completed its previously announced acquisition of Brazilian Gold Corporation (TSXV:BGC). The acquisition, valued at about $13.5 million, expands BRI’s footprint in Brazil by adding BGC’s assets, including the São Jorge and Boa Vista gold projects in the state of Pará. Brazil Resources acquired the Cachoeira project from Luna Gold Corp (TSX:LGC) in the fall of 2012. 

Cosigo Resources (TSXV:CSG), which in July completed a drill program at its Machado gold project in Southeastern Colombia, said it is expecting positive assay results from the program in the next few days. Machado contains a land package of about 200,000 hectares in the Taraira Gold Belt. A government drill program during the 1990s showed visible gold in 6 of 12 drill holes, according to Cosigo.


Securities Disclosure: I, Andrew Topf, hold no investment interest in any of the companies mentioned. 

Related reading:

Colossus Minerals: What’s Going On?


S&P 5003804.01-17.54


Heating Oil4.03-0.09
Natural Gas6.54-0.03