Precious Metals

Gold prices weakened earlier this week as a result of China reducing growth estimates to an eight-year low of 7.5 percent. On a relative basis, the current price of gold represents a 1.2 percent total decline from last week.

By Dave Brown — Exclusive to Gold Investing News

Gold Price Lower on Weak China Growth

Gold prices weakened earlier this week as a result of China reducing growth estimates to a seven-year low of 7.5 percent. The gold price has recovered slightly following promising United States payroll data and rekindled optimism that Greece will complete a crucial bond swap deal.

The spot market gold price traded in the range of $1,698.30, above its 200-day moving average of around $1,678. On a relative basis, the current price of gold represents a 1.2 percent total decline from the last week. 

Precautionary note

For gold investors, a “sterilized” bond buying policy, which is reportedly under consideration by the US Federal Reserve, could diminish gold’s traditional appeal as an inflation hedge against shrinking portfolio value. The purpose of this new bond program would be to reduce the concern of future inflation if the Fed elects to initiate plans to boost the economy in the months ahead, and could mean that investment in gold positions will move toward dollar-denominated assets.

Future announcements

The US Bureau of Labor Statistics is planning to release an Employment Situation Report for February on March 9 which takes into account the Civilian Unemployment Rate as well as the non-farm payroll employment rate as labor market indicators. The Civilian Unemployment Rate is a lagging indicator of the general economy which measures the number of people who are unemployed as a percentage of the labor force. Meanwhile, the non-farm payroll employment rate, is a coincident indicator based on the number of paid employees in the nation’s business and government establishments.

The report is considered the single best way to understand the state of the labor force in the US at any point in time. If the data is considered to be below consensus expectations, gold prices could strengthen further on market risk sentiment.

Company news

Peru has indicated that Newmont Mining Corporation‘s (TSX:NMC,NYSE:NEM) $4.8 billion Conga gold and copper project will reach approval, although the final details have yet to be confirmed. An environmental impact study from two years ago already approved the project, but authorities halted construction last November following violent protests from environmental and social groups concerned about the risk of water source pollution.

Peruvian Mine and Energy Minister Jorge Merino said the government, which has appointed a three-person commission to review a favorable environmental impact study, was looking at ways to improve the project. Conga is set to produce up to 350,000 ounces of gold per year and 120 million pounds of copper during its first five years of operation.

This activity is of interest for gold investors because it indicates Peru’s intention to promote mining interests within the country. As Peru is a top ten gold producing country and a top ten exploration target, this move is important. Last year the country exported approximately 8.5 percent less gold than it did the previous year, according to the US Geological Survey. Peru is estimated to hold around 2,000 tons of gold, which places it ahead of China and behind Brazil, its much larger South American neighbor to the east.

Junior company news

Ashburton Ventures Inc. (TSXV:ABR) announced that Eurasian Minerals Inc. (TSXV:EMX) has agreed to grant Ashburton a 70 percent option for the Richmond Mountain gold property, subject to signing conditions and the execution of a formal agreement.

Helio Resource Corp. (TSXV:HRC) has commenced drilling at its Gold Kop target at the Namibian Damara Gold project. Its drill exploration program last year yielded positive results, including the discovery of Navachab-style gold mineralization.

Latin American Minerals Inc. (TSXV:LAT) released results from the first five diamond drill holes at its Tacurú target. Following the release of trench results last December, an initial drill program of six holes was completed on the 14.8 km gold trend in January. Latin American Minerals plans to concentrate exploration efforts on several target zones along the new gold trend this year.

Olympus Pacific Minerals Inc. (TSX:OYM,OTCQX:OLYMF,ASX:OYM) has expanded its global gold resources to 4.53 million ounces.

Spanish Mountain Gold Ltd. (TSXV:SPA) announced results from the 2012 drill program at its British Columbia-based gold project. The results are expected to be included in an updated resource estimate later this summer.


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


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