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Gold prices have taken a beating lately, and although there were signs of improvement this week, the yellow metal still has a long way to go before engaging in a full-on turnaround.
Gold prices have taken a beating lately, and although there were signs of improvement this week, the yellow metal still has a long way to go before engaging in a full-on turnaround. A strong US dollar and fears of rising interest rates have been driving gold down, but the metal was buoyed up slightly by tensions in Hong Kong and by fears of the spreading Ebola virus.
On Thursday, Reuters reported that spot gold prices were up 0.3 percent to $1,217.30 by 11:47 PM ET, while gold futures for December delivery gained $2.20 to reach $1,217.70 on New York’s COMEX.
Those gains followed a slight bump from the day before, when December gold futures recorded a 3 percent gain to settle at $1,215.50. However, prices touched $1,205 earlier on Wednesday, according to the Wall Street Journal, uncomfortably close to the psychologically important level of $1,200 per ounce.
Positive factors
Pro-democracy protests in Hong Kong have driven some favor for gold, which is often seen as a safe haven investment, while other issues such as an assault on a Syrian border town by Isalmic insurgents and the arrival of the first case of Ebola in the United States have supported prices as well.
To be sure, some analysts are positive on the yellow metal, at least in the short term. Edward Meir, metals analyst at brokerage INTL FCStone, told Reuters, “[w]ith the likelihood of further weakness in equity markets, coupled with the still-volatile situation in Hong Kong, we would rather not want to be short gold here, as we think the precious metal may benefit from some short-covering heading into the weekend.”
Michael O’Rourke of Jones Trading, saw a potential catalyst for gold on the back of a weakening equities market. “From a timing perspective, the best opportunity would likely come when the dollar finally pauses to consolidate its current gains. Even the temporary dissipation of such a headwind would likely lead to a sharp rally,” he told Marketwatch.
The ever rising dollar
Still, its worth noting that gold prices recorded a 5.9 percent loss for September, the biggest since June 2013, and while the US dollar has taken pauses in its relentless ascent, analysts have said that the rally could continue for months, or even years, which isn’t good news for gold. Chris Turner, global head of strategy at ING told the BBC, “[w]e think the dollar rally has another two years to go at least.”
While gold bugs might have had lifted spirits over the past two days, they will no doubt be watching the US dollar closely – in tandem with the rest of the market – to see whether it continues to weigh on gold prices.
Company news
Whatever future may hold for the gold price, miners have certainly been keeping busy.
Serabi Gold (TSX:SBI,AIM:SRB) announced on Monday that it had secured an $8 million secured loan facility arrangement with Sprott Resource Lending Partnership. CEO Mike Hodgson was positive on the endorsement, stating “I view the decision by Sprott to provide a loan facility to Serabi, as a significant endorsement of the achievements we have made and will continue to make at Palito, and our ability to continue to increase production during the rest of 2014.”
Serabi intends to use funds from the facility for ongoing development at its Palito Mine and the Sao Chico gold project and for an additional drill program at Sao Chico.
On Tuesday, Klondex Mines (TSX:KDX,OTCQX:KLNDF) released its updated mineral resource estimate for its Midas gold mine in Nevada. The latest estimate marked an increase in total measured and indicated equivalent ounces of gold as well as an increase in the measured and indicated grade and in the total ounces for the inferred resource. Klondex reported mineralization occurring near current mine workings.
Further north, Kaminak Gold (TSXV:KAM) provided an update on its Coffee gold project in Canada’s Yukon, reporting that feasibility activities are now underway and that all programs are progressing on schedule and within budget. Kaminak is also anticipating drill results in coming weeks from exploration work at its new gold discovery, Kona North.
Finally, Corvus Gold (TSX:KOR,OTCQX:CORVF) reported results from the final holes of its Phase 1 drill campaign at its North Bullfrog Project, also in Nevada. The company also reported on the first hole from its Phase 2 drill program at the property, announcing that a new parallel target zone had been defined to the west of the main Josh Vein. Jeff Pontius, Corvus CEO, commented, “[r]esults from the last drill holes of the Phase I program have increased the extension potential of the Yellowjacket system to the north, which remains open, and showed that gold mineralization can occur in different host rocks thereby significantly adding to the potential of the overall District.”
Securities Disclosure: I, Teresa Matich, hold no investment interest in any of the companies mentioned.
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