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Continued concerns about the tapering of quantitative easing brought gold down to its lowest level in nearly three years this week.
According to Kitco’s 24-hour gold chart, the safe-haven asset initially ticked up, encountered resistance at about $1,206 per ounce, then headed down to a daily low of $1,200, a fall of $23.90, or 1.95 percent, from the previous session. That is the lowest gold has been in almost three years.
Thursday’s gold slide was emblematic of another miserable week for the precious metal and its investors. Still clinging to a two and a half-year low reached last Wednesday, spot gold finished Monday at $1,284, dropped another $6 on Tuesday and then broke free for another vicious downleg on Wednesday, losing $48 to finish the day at $1,229. Gold investors are exiting their positions in ETFs, the paper investment vehicle for gold, and Tuesday saw the second-biggest percentage drop in holdings so far this year for SPDR Gold Trust (ARCA:GLD).
More strong US economic data released Tuesday and reverberations from last week’s Fed meeting were blamed for the sell-off.
At the close of trading in New York on Thursday, spot gold was last quoted down $23.40 at $1,202.50, while gold futures for August delivery fell $28.70, to $1,201.10.
Reuters reported that technical selling was the reason for Thursday’s fall, with positive US economic news outmuscling comments from the Fed that should have been bullish for gold. Unemployment claims fell by 9,000 last week, while pending home sales rose 6.7 percent from April to May. However, New York Fed President William Dudley also said that the Fed’s $85-billion-a-month asset purchase program could get even more aggressive if economic growth and the labor market turn out weaker than expected, Reuters said.
Those comments echo the opinions of other gold commentators, such as Peter Schiff who recently wrote that he strongly doubts the Fed’s “taper talk” will come to fruition; in fact, he believes that the central bank will increase, not diminish, quantitative easing.
Ross Norman, CEO of bullion dealer Sharps Pixley, also questioned the revival in the US economy, acknowledging that any perceived improvement is bad for gold.
“I don’t think we have seen the end of the economic crisis by a long shot. The improvement in the U.S. jobs market is only partial, and that is lending support to the gold price. But I think we could still edge lower in the short term as investors continue to liquidate,” he stated.
Kitco’s Jim Wyckoff sees a bottom forming for gold before an uptrend takes hold.
“There is no doubt at all the gold bulls are taking a big whipping at present. However, if market price history repeats itself (which it most certainly will), the gold market will overdo itself on the downside (as all commodity markets do during major bear market sell-offs) and then prices will rebound and embark upon a new price uptrend. Such has been the cycle of raw commodity markets dating way back in time,” he said.
Company news
Gold’s slump is taking its toll on Barrick Gold (TSX:ABX,NYSE:ABX), the world’s largest gold miner by production. Barrick said Monday it is laying off up to a third of the staff at its Toronto headquarters from a total corporate payroll of over 400, according to a report in The Financial Post. The cuts come on the heels of dozens of layoffs at Barrick’s Australian operations. Separately, the company also said it also plans to overhaul its board of directors. Barrick is facing pressure from shareholders amid cost overruns, including its massive Pascua Lama project in South America and a flagging share price.
MINING.com reported that Peru suspended the permit for the Chucapaca open-pit gold mine in the country’s south, which is being developed by South African company Gold Fields (NYSE:GFI). According to Spanish-language newspaper Gestión, the suspension follows an inspection showing the company does not have the necessary land permits. Chucapaca is a joint venture between Gold Fields and Compañía de Minas Buenaventura (NYSE:BVN).
Ready for some good news? Lake Shore Gold (TSX:LSG) jumped 56 percent Monday on the Toronto main board following an announcement that it anticipates significant improvement in its second-quarter results. “We decided to update the market at this time, given that we are seeing a disconnect between the excellent progress we are making with our operations and projects and recent movements in our share price,” President and CEO Tony Makuch said in the press release. Lake Shore is down about 63 percent year to date. The company mines from three complexes in the Timmins gold camp of Northern Ontario. It expects to pour 29,000 ounces in Q2 at an average gold grade exceeding 4 grams per tonne.
Junior company news
A dispute between Coeur Mining (NYSE:CDE, TSX:CDM) and Rye Patch Gold (TSXV:RPM) that has dragged on for nearly two years was finally settled out of court this week. The disagreement revolved around junior company Rye Patch Gold’s staking of hundreds of claims near Coeur’s Rochester gold-silver mine in Nevada after Rye Patch discovered that Coeur, due to a “clerical error,” had neglected to pay its claim maintenance fees. The error allowed Rye Patch, which also had claims near Rochester, to acquire 400 unpatented mining claims covering 30.3 square kilometers, said Mineweb, containing 1.18 million ounces of gold and gold-equivalent ounces. The settlement requires Rye Patch to convey all the disputed claims to Coeur in return for a $10-million cash payment plus a 3.4-percent net smelter royalty from the Rochester mine.
Majestic Gold (TSXV:MJS) announced Thursday that it has entered into an agreement with Yantai Dahedong Processing whereby Dahedong will exchange its 25-percent interest in the net profits of its Chinese subsidiary, Yantai Zhongjia Mining, for a 25-percent working interest in Zhongjia. Vancouver-based Majestic indirectly owns a 96-percent interest in Zhongjia, which owns the Song Jiagou open-pit gold mine in Shangdong province, China. The mine produced 4,776 ounces of gold in its second quarter, ended March 31.
Touchstone Gold (TSX:TCH) discovered a new high-grade mineralized trend at its Segovia gold project in Colombia. Called the Bonanza Zone, the trend is about 350 meters west of the Pepas-Filodehambre trend, where Touchstone has completed over 15,000 meters of diamond drilling.
Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.
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