Six-month High for Gold on Ukraine Tension, Chinese Economy

Shaking off last week’s flat performance, gold rose steadily this week, pushed up in large part by the escalating Ukraine situation and concern about China’s economy. 

The yellow metal’s upward trend began Monday morning, when it jumped from $1,331.60 per ounce to $1,344.20 in just a few hours as a standoff in Ukraine offset pressure from both strong US payroll data and weakness in other commodities, as per Reuters. Tuesday, gold rose to $1,349.90 as investors seeking a safe haven snapped it up. Their concerns, states another Reuters article, were based on Ukraine developments and “fears of an economic slowdown in China.”

Wednesday was much the same story, with gold jumping to $1,367.04 midway through the afternoon, again on the back of investors seeking it out as a safe haven. More corporate defaults in China also played a role in gold’s ascent, according to Reuters.

Today was a little more exciting. Gold broke through the $1,370 mark, rising as high as $1,374.85 late in the afternoon — that’s it’s highest price since September 10, The Financial Express notes.

Commenting on that development, Peter Fertig, a consultant at Quantitative Commodity Research, told the news outlet, “[i]t is currently the political developments in Ukraine, which are having a negative impact on the stock markets, that are supporting gold. The weaker data seen in China, and the news that two corporate bonds were in default, has also spooked investors.”

The yellow metal closed today at $1,371.10.

Physical buying lackluster

The key question, of course, is whether gold’s positive price movement will continue. Unsurprisingly, opinions differ.

While The Wall Street Journal states that some market watchers believe “there [is] plenty of reason for gold to continue its move higher,” Kitco News reported today that others are “viewing the current price rally cautiously” due to the fact that physical gold buying, “particularly out of Asia, has been subdued at best for the past few weeks.” Their concern is that if the pressure provided by Ukraine and the Chinese economy disappears, “values for gold may … wither without a pickup in physical buying.”

Explaining how investors might handle the situation, Joni Teves, an analyst at UBS (NYSE:UBS), said, “[i]f you are long gold, be flexible in your position because it could move very quickly.”

Company news

Tuesday, Southeast Asia-focused Besra Gold (TSX:BEZ,OTCQX:BSRAF,ASX:BEZ) put out an updated feasibility study for the first stage of its Bau gold project, commenting that it details “significantly improved financial data from an already promising project.” Most notably, the company’s press release states, its net present value has risen from $48.3 million to $91.4 million, while its internal rate of return has increased to 38 percent from 25.4 percent.

Also on Tuesday, Mineweb revealed that Barrick Gold (TSX:ABX,NYSE:ABX) has sold 13.5 percent of its holdings in African Barrick Gold (LSE:ABG) to institutional investors for gross proceeds of US$188 million. Previously, the company had tried to sell all of its African Barrick stake.

Junior company news

Gold-copper exploration company West African Resources (TSXV:WAF,ASX:WAF) on Monday reported further high-grade results from a 7,500-meter reverse-circulation and diamond-core drilling program at the Mankarga 5 deposit, located at the Tanlouka permit at its Burkina Faso-based Boulsa project. Highlights include hole TAC0029 with 28 meters at 1.87 grams per tonne (g/t) gold from 8 meters, including 1 meter at 6.02 g/t gold and 1 meter at 15.61 g/t gold.

Also on Monday, the McKenzie Valley Land and Water Board issued a land use permit to TerraX Minerals (TSXV:TXR). The permit, which is for a term of five years, allows the company to conduct advanced exploration and drilling programs at its Yellowknife City gold project.

The same day, Canamex Resources (TSXV:CSQ,OTCQX:CNMXF) began diamond drilling at its Nevada-based Bruner gold project. Drilling this year will consist of about 1,000 meters of core drilling and 9,000 meters of reverse-circulation drilling.

Greg Hahn, president and COO of Canamex, said the company will be following up on “exciting drill hole intercepts … encountered at both the historic resource area and the Penelas East discovery area in 2013.”

On Wednesday, Pacific Booker Minerals (TSXV:BKM,NYSEMKT:PBM) submitted a response to a letter it received from Doug Caul, associate deputy minister and executive director of the BC Environmental Assessment Office (EAO). Caul’s letter gave Pacific Booker the chance to respond to the September 12 version of a Recommendations of the Executive Director report, which discusses the company’s application for an environmental assessment certificate.

Pacific Booker said that Klohn Crippen Berger has put together a report that “clarifies the remaining concerns of the EAO regarding the Morrison Copper/Gold Project.”

Earlier today, Corvus Gold (TSX:KOR,OTCQX:CORVF) provided further drill results from the 2014 exploration program at its Nevada-based North Bullfrog project. Two separate veins were intersected in hole NB-14-380; the upper one yielded 4.2 g/t gold and 150 g/t silver over 3.6 meters, while the main one was found to contain 13.8 g/t gold and 243 g/t silver over 4.8 meters.

Finally, Carpathian Gold (TSX:CPN) announced this afternoon that it has started recommissioning the processing plant at its Brazil-based RGM mine. The company expects that over the next several months it will “build up to the planned production target of approximately 8,000 ounces of gold per month.”

On a less positive note, Carpathian said that a lack of cash caused by delays to the mine’s start up has increased its debt with Macquarie Bank to US$141.2 million. The company continues to “pursue strategic initiatives in conjunction with Macquarie.”

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

Related reading: 

Can Beleaguered Carpathian Gold Recover?