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Strengthening investor optimism regarding the US economy and a sharp rise in treasury yields have caused a decline in gold prices and greater demand for US dollar-denominated assets.
By Dave Brown — Exclusive to Gold Investing News
Gold prices have declined this week due to strengthening investor optimism on the United States’ economic outlook, with a sharp rise in treasury yields also contributing to gold’s muted prices. The decline has resulted in greater investment demand for US dollar-denominated assets.
Spot market gold prices rebounded by about 0.40 percent on Thursday after contracting nearly two percent during Wednesday’s trading session. Gold prices are trading in the range of $1,659.10 per troy ounce, having declined nearly four percent during the week after the Federal Reserve issued a more optimistic economic expectation. The Fed’s statement has temporarily diminished market expectations of additional policy measures to keep rates low. Investors will note that the week’s decline in gold prices has encouraged a demand stimulus in top consumer India.
Technical analyst perspective for “critical” support levels
Frank McGhee, Head Precious Metals Trader at Integrated Brokerage Services, says gold prices may be close to a critical support level, commenting that “we are at some very critical levels around the 200 day exponential moving average. If these ranges hold we could see a short covering rally. If they don’t, we could see another round of longer-term liquidation.” For the longer-term perspective, McGhee stated, “I don’t think the problems that took the price of gold up to $1,900 have ended by any means; this is just a short-term band-aid.”
Quadruple witching
Many investors will look forward to Friday, when contracts for stock index futures, stock index options, stock options, and single stock futures all expire. Their expiry could mean a relatively volatile trading session with a higher volume of transactions in the market. The Consumer Price Index is expected on the same date, and could provide additional details to support or contest the case of a strengthening US economy.
Company news
Endeavour Mining Corp. (TSX:EDV,ASX:EVR) plans to increase output at its Ghana and Burkina Faso gold mines to between 170,000 and 190,000 troy ounces this year. With the addition of the Agbaou gold mine in Côte d’Ivoire, the increase would raise the company’s production target to 250,000 troy ounces per year at a total cash cost (excluding royalties) of $645 to $685 per troy ounce by the end of next year.
The company reported gold output of 177,290 troy ounces last year, following the incorporation of Adamus Resources’ assets. Endeavour remains focused on gold production in West Africa. During 2011, Endeavour completed the sale of its diamond properties in South Africa, completed a spin-out and initial public offering of its rare earth exploration properties in Namibia, and sold its debt finance and related merger and acquisition advisory business in order to focus on its core gold mining activities.
Junior company news
Colossus Minerals Inc. (TSX:CSI,OTC Pink:COLUF) reported intersects of 7.81 g/t, 5.70 g/t, and 18.00 g/t gold within two meters of the surface on the Elefante Area of its 75 percent owned Serra Pelada gold-platinum–palladium project in Brazil. Intersects of 4.5 metres grading 16.08 g/t gold, 0.61 g/t platinum, and 1.19 g/t palladium were reported in the GT Zone. The company believes the positive drill results indicate that both the upper and lower limbs of the fold structure may be more important mineralization-bearing zones than previously believed.
Nortec Minerals Corp. (TSXV:NVT) reported results from its ongoing phase five drill program at its Northern Finland Läntinen Koillismaa project. The company optioned 80 percent interest in the project to Finore Mining Inc. (CNSX:FIN) over the course of three years, with Finore presently operating the phase five exploration drilling program.
MAX Resources Corp (TSXV:MXR) announced assay results from its Majuba Hill project in Nevada. The company intersected 0.10 g/t gold, 5.49 silver and 0.09 percent copper at 293 meters. The gold mineralization is at a grading of 0.145 g/t gold and was intercepted over the final 116 meters of the hole.
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.