Gold Breaks Above $1,300 on Weak Dollar

A weak US dollar was largely credited for gains in the gold price on Thursday, which pushed the precious metal above $1,300 an ounce after it fell below that psychologically important resistance level earlier in the week.

The week started off sluggish for gold, with spot and futures prices dipping down to $1,301.90 and $1,303.40 on Monday, before slipping further on Tuesday due to a hawkish statement from Atlanta Fed President Dennis Lockhart. Kitco reported Lockhart saying that the US Federal Reserve could start tapering its bond-purchase program known as quantitative easing at some point this year. Signals that the Fed could scale back the $85 billion-a-month asset purchases, designed to grow the economy and keep interest rates low, have been bearish for gold and other precious metals.

A sharp decline in the US trade deficit in June, indicating a healthier economy, was also bearish for gold. At the end of Tuesday’s session spot gold was down $15 to finish at $1,289.50, while December gold fell $19.80 to end at $1,282.60.

Short covering on Wednesday had gold trading a few dollars higher, and by Thursday more buyers entered the market, urged on by a weaker U.S. dollar, which plumbed a six-week low. Higher-than-expected imports and exports from China raised gold and most other commodities, while the European Central Bank’s prediction of a 0.6 percent contraction in the Eurozone this year, helped propel gold past $1,300. At the close of trading the yellow metal was up $22.70 to $1,310.50 on the spot market, while gold futures increased $23.80 to finish the session at $1,309.10.

Company news

Randgold Resources (LSE:RRS) may have to use a bank credit facility to fund its $1.7 billion Kibali gold mine in the Democratic Republic of Congo, due to declining income caused by slumping gold prices. The company reported a 61 percent decline in second-quarter profit compared to last year, while sales fell 27 percent. “The back end of the year is going to be more ounces and lower costs,” Randgold CEO Mark Bristow told Reuters. Kibali is due to begin production later this year.

Randgold’s partner in Kibali, AngloGold Ashanti (NYSE:AU), on Wednesday suspended its dividend but promised shareholders it would rein in costs to target savings of $482 million in 2014. Business Day reported AngloGold’s CEO, Srinivasan Venkatakrishnan, saying the company plans to “more than halve” its corporate costs by 40 percent of 2,000 jobs in the next 18 months, and narrow exploration programs to three core areas: Tropicana, Colombia and the Siguiri region of Guinea.

Mining companies operating in Kenya are considering their options after the government there revoked some mining licenses and doubled gold royalties to 5 percent, according to Reuters. This latest round of resource nationalism comes after Tanzania, the continent’s fourth-largest gold producer, upped royalty rates in 2010. Affected companies in Kenya include Pacific Wildcat Resources (TSXV:PAW) and ASX-listed Base Resources (ASX:BSE).

Back in the United States, Bloomberg reported that Allied Nevada Gold (TSX:ANV,NYSE:ANV), which operates the Hycroft mine in Nevada, plunged the most in over four years after reporting a drop in earnings and deferring plans to build a processing plant. The stock cratered on Tuesday by 26 percent, its worst day since December 2008, on a fall in second-quarter profits from 7 cents a share to 4 cents a share.

Junior company news

Corvus Gold (TSX:KOR) reported results from five additional drill holes from its Yellow Jacket target, North Bullfrog Project, Nevada. Mineralization in holes NB-12-138, NB-13-344 and NB-13-347 indicate the potential of a high-grade starter pit zone that can be incorporated into the Sierra Blanca deposit, the company said.

Vancouver-based Iron Creek Capital (TSXV:IRN) signed an agreement with a subsidiary of Kinross Gold (NYSE:KGC,TSX:K), giving Kinross the right to acquire up to a 75 percent interest in Iron Creek’s Las Pampas mining concessions in Northern Chile. Under the deal, Kinross must spend US$5 million in exploration expenditures over four years to earn 60 percent, and $20 million over five years to earn 15 percent.

Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.