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Gold prices recovered some losses on Thursday after hitting a three-week low on Wednesday.
Gold took a hit on Wednesday, dropping 1.5 percent, its biggest single-day drop in three weeks due to deflation concerns stemming from the US fiscal crisis. Initially, according to Reuters, rumors of a “fat-finger” erroneous trade was speculated as to blame. However, in the end, fingers pointed to a round of heavy stop-loss orders from fund investors as the driver behind the price decline.
After hitting a low of $1,705 Wednesday, gold rebounded slightly on comments from House Speaker John Boehner hinting at a possible compromise to the fiscal cliff. Gold prices gained some lost ground on Thursday, closing up at $1,727.70.
In an article released by Sharps Pixley, CEO Ross Norman’s assessment of Wednesday’s large sell-off concluded that aside from profit-taking, the reason behind the sales was a bet that the US fiscal cliff will in fact be averted. However, he stated that “while looking for a Fiscal Cliff we actually found a Gold Cliff.” Norman goes on to explain that ” if the US economy IS the first to show signs of recovery next year then the dollar-friendly environment could well take the shine off gold for a further year. This is not a bearish forecast but may call into question whether the 17% year-on-year compounded rises we have seen for a decade can be sustained or perhaps replaced by more modest gains. Some bulls now seem to see single-digit growth as a bear market.”
Until the fiscal crisis is resolved, volatility in gold prices can be expected. Economist Intelligence Unit’s Caroline Bain told the Reuters Global Gold Forum, “It could be positive for gold whichever way the negotiations go, but a rally on a speedy resolution might be quite a short-term positive, whereas any risk of prolonged sovereign stress could be a longer-lasting positive.”
Echoing Bain’s sentiment is Jim Comiskey, senior account executive with Archer Finanical Services, who told Forbes, “You can almost paint the story in both directions. [Depending on] how close to the edge of that cliff they [political leaders] choose to walk us.”
Company news
Gold Fields Limited (NYSE:GFI,JSE:GFI) announced that it has proposed to unbind its wholly-owned subsidiary, Sibanye Gold Limited, creating a spin-off gold company in South Africa. The move comes as the fourth-largest gold producer reacts to the influx of strikes and high costs caused by inflation that are impacting the company’s output.
According to the company press release, “Subject to approval by the JSE and the NYSE, Sibanye Gold will be listed as a separate and independent company on both exchanges in February 2013. Sibanye Gold shares will then be distributed to existing Gold Fields shareholders (whether held in the form of ordinary shares or depository receipts).”
Osisko’s (TSX:OSK) Canadian Malartic gold mine was raided by Quebec’s provincial environmental authority on Wednesday who were searching for documents relating to drilling. The raid comes as a result of environmental concerns. In October the company was asked to increase its safety measures when the company engaged in unplanned blasting.
Osisko also announced the closing of the acquisition of Queenston Mining (TSX:QMI) shares from Agnico-Eagle. Osisko now holds 9.2 percent (7,795,574 common shares) of Queenston.
Junior company news
Lincoln Mining (TSXV:LMG) has signed a definitive purchase agreement and closed the acquisition of the Bell Mountain property in Nevada. In order to acquire 100% interest in the Bell Mountain property, which includes 1,212 hectares of land, the company is required to spend an additional $1,755,000 in exploration before June 28, 2013.
Astur Gold (TSXV:AST) has received approval of the Environmental Impact Assessment for Mine Development at its Salave gold property in Asturias, Spain.
Premium Exploration (TSXV:PEM) has started an 8,000m infill and definition drill program at the Friday Zone at its Idaho gold project. Up to 25 drill holes are planned, ranging in depth from 100 meters to 350 meters.
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.