Precious Metals

Gold Eases Up on Good Economic Data

Precious Metals

Heightened tension in the Middle East, along with positive economic news from beleaguered China and Europe, pushed gold higher this week.

Gold traded in a tight range this week and at lower-than-normal volumes due to the Thanksgiving holiday yesterday in the United States. The price of bullion on Thursday climbed slightly due to positive manufacturing data out of China and Europe, alongside increased tension in the Middle East. Gold is considered a safe haven asset in times of economic and political turmoil. 

Reuters reported that the HSBC Flash China Purchasing Managers’ Index reached a 13-month high of 50.4 in November, while manufacturing activity in Europe slowed less than expected this month.

Both events were bullish for gold, with investors continuing to buy the metal on the hope that Eurozone economies are not as weak as had been feared, and news from China indicating fresh demand for bullion in the Middle Kingdom, which is vying against India to be the world’s largest gold consumer.

“If there is a belief that China has turned the corner, there could be more physical demand,” Reuters quoted Saxo Bank vice president Ole Hansen as saying.

Spot gold was last quoted at $1,729.70, up just 50 cents from the previous day’s closing numbers. Gold has risen about 11 percent so far this year, mostly due to quantitative easing measures announced by the European Central Bank and the US Federal Reserve.

Central banks, ETPs keep buying gold

The price of gold was also buttressed this week on new International Monetary Fund data that indicates that central banks are continuing to purchase the yellow metal. Mineweb reported that 40 tonnes were purchased in October and purchases are on track to match last year’s 456 tonnes (net purchases). The main buyers were Brazil with 17.2 tonnes, Turkey with 17.5 tonnes and Kazakhstan with 7.5 tonnes. The purchase by Brazil raises the country’s gold holdings to the highest level since 2001. Germany, on the other hand, the second-largest holder of gold after the United States, reduced its holdings by 4.2 tonnes. Gold held through exchange-traded products (ETPs) is also on the rise, at a record 2,605.318 tonnes, Mineweb said, quoting Bloomberg.

Meanwhile, in India, where the gold-buying season is going full tilt, the Chhath festival in Northern India is expected to give fresh impetus to gold buying. Gold coins are being discounted up to 7.5 percent as Hindus pay homage to the Sun God. By comparison, last week Gold Investing News reported that gold sales during the five-day Diwali festival were curbed due to high prices and totalled only around 70 percent of last year’s 100 metric tons.

Company news

Eldorado Gold (TSX:ELD,NYSE:EGO) said it will not go ahead with a planned $500-million debt offering, citing “deteriorating conditions.” The Canadian company had four days earlier announced the offering of senior notes, intending for proceeds to go towards general corporate purposes, including growth initiatives.

“Deteriorating conditions in the debt capital markets led us to conclude that the proposed offering of senior notes would not be in the best interest of shareholders under the terms currently available,” stated Paul Wright, CEO.

Another Canadian gold miner, Detour Gold (TSX:DGC), is trying to raise $106 million to start production at its gold mine in the province of Ontario. When it starts in January, the open-pit mine is slated to become Canada’s largest gold mine at an average annual output of 657,000 ounces.

South Africa’s Gold Fields (NYSE:GFI) said it is no longer feasible to develop the Chucapaca gold mine in Peru into an open-pit mine. The project is a joint venture with Peruvian miner Buenaventura.

“The partners have studied the viability of a large open-pit operation capable of sustaining a 30,000 tonnes per day throughput. A first draft of the feasibility study has been completed and as a result of relatively high capital and operating costs this option would not have delivered acceptable project returns,” the companies said in a joint press release.

Future studies will focus on other options, including underground mining or a combination open-pit and underground operation. The deposit has an estimated 7.6 million ounces of gold and gold equivalents.

Toronto- and London-listed Patagonia Gold (LSE:PGD,TSX:PAT) said Thursday that it has been granted the final permit for producing gold from the Lomada de Leiva deposit in Argentina. The company is ready to begin constructing the main heap leach and production is slated for the second quarter of 2013. The mine is expected to produce an annual 21,000 ounces.

Junior company news

US silver miner Hecla Mining (NYSE:HLexpanded its interests into Nevada with a $2.5 million investment in Canamex Resources (TSXV:CSQ). “Hecla is pleased to be able to make a strategic investment in Canamex to participate in the re-emergence of a historic Nevada gold district with outstanding exploration and development potential,” Hecla CEO Phil Baker said Monday. He added, “[t]his is one of many strategic investments in junior mining companies with strong management and outstanding land-exploration packages that Hecla is contemplating as we seek to expand our exposure to under-explored silver-gold mining districts in the Americas.” The funds will be used to develop Canamex’s Bruner property in Nevada.

Cogitore Resources (TSXV:WOO) reported that drilling is underway to test the Gold Hill showing at its Lemoine project, located south of Chibougamau, Quebec.

“Results of recent chip sampling of the Gold Hill showing by Cogitore included up to 0.92% copper and 85.4 g/t gold (2.49 oz/ton gold), and 0.87% copper and 1.9 g/t gold over narrow widths. These results are consistent with historical surface sampling reported by Teck Exploration Ltd in 1999 which included grab samples up to 2.8% copper and 48.2 g/t gold, and a chip sample returning 6.3 g/t Au over 7.3 metres,” the company press release states.

Roxgold (TSXV:ROG) announced initial results from the current step-out drilling program at its 100-percent-owned Yaramoko concession in Burkina Faso, commenting that the results “confirm the presence of high grade gold mineralization outside of the existing mineralized envelope and represents a significant step out from known mineralization down plunge within the 55 Zone.”


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


S&P 5004100.79-10.29


Heating Oil2.87+0.10
Natural Gas2.52+0.07