Weekly Round-Up: The US Steals the Show

- March 15th, 2013

Rising consumer spending, a pick up in hiring and surging stock markets boosted confidence in the world’s biggest economy this week, while the tiny nation of Qatar made a huge gas find.

Weekly Round-Up: The US Steals the Show

Commodities are ending the week mostly flat, with gold in particular failing to make gains in the face of continued strength in the US economy. A strong economic situation in the US normally lowers the yellow metal’s safe-haven appeal.

Gold also faced headwinds from the strong US dollar, which has lowered the cost of imports, thereby reducing the risk of inflation, which many investors buy gold as a hedge against. As Reuters reported, the dollar surged to a seven-month high against a basket of other currencies on Wednesday.

The dollar was helped by the Department of Commerce’s latest report on consumer spending, which came out on Wednesday: in February, retail sales rose 1.1 percent from January, posting their biggest jump in five months and topping economists’ expectations of a 0.7-percent increase.

“On the whole, the positive tone in this report is quite encouraging as it comes at a time when US households are being buffeted by higher personal taxes and rising energy prices, and the positive momentum in spending is indicative of continued resiliency in consumer spending,” TD Securities strategist Millan Mulraine told the Financial Times.

Rising consumer spending is being supported by continued employment gains. Department of Labor figures released Thursday show that the number of Americans filing jobless claims averaged 346,750 in the past four weeks, the lowest level since March 2008.

Meanwhile, figures released Friday morning show that US consumer prices rose 0.7 percent in February, marking their fastest rise since June 2009. But gas prices accounted for a significant portion of that gain. Stripping out volatile segments like transportation and food, inflation has risen at a 2-percent rate over the last 12 months, which is within the Federal Reserve’s target range.

Stock markets, too, continued their strong performance, with the Dow Jones Industrial Average rising further after setting a new all-time high last week. Thursday marked the Dow’s 10th straight day of gains, its longest streak since November 1996, according to International Business Times.

In morning trade Friday, Brent crude is up 1.01 percent, at $110.10 a barrel, while copper is down 0.40 percent, at $3.52 a pound. Gold is up 0.17 percent, at $1,593.40 an ounce.

Gold

Centamin (LSE:CEY,TSX:CEE), which owns the Sukari mine in Egypt, released an updated production forecast this week. The company said it expects Sukari to produce 320,000 ounces of gold this year at a cash cost of $700 per ounce. That target is up 22 percent from its 2012 output. Centamin also said that it expects to start commissioning the expanded plant at the site in the second half of 2013 after this project faced delays. Costs have also risen: Centamin now pegs the expansion’s capital cost at $325 million, up from its earlier estimate of $287.6 million.

Tomagold (TSXV:LOT) has expanded its drilling at the Monster Lake property in Quebec by 1,500 meters and will now drill a total of 5,000 meters at the site. Tomagold drilled 16 holes (2,420 meters) in the winter of 2012 and intercepted 237.6 grams per metric ton (MT) of gold over 5.7 meters. “The new holes will test the zone along strike and at depth to enable the company to better assess the potential of this new discovery,” president and CEO David Grondin said.

Orefinders Resources (TSXV:ORXentered into agreements to acquire properties in the Kirkland Lake-Larder Lake gold district in Ontario. The last drilling on these holdings occurred in 1949 and returned 2.08 ounces per ton of gold over 8 feet at a depth of 50 feet, though the company has warned that this result is not NI 43-101 compliant and shouldn’t be relied upon.

Oil and gas

The US Energy Information Administration (EIA) lowered its oil price forecast this week, according to Bloomberg. The EIA now sees West Texas Intermediate oil trading at an average of $91.92 a barrel in 2013, down from its February forecast of $92.81. The agency also forecasts an average Brent crude price of $108.33 a barrel, which is $1 lower than its February outlook. The declines are due to a pullback in demand: the EIA sees global oil consumption of 90.13 million barrels a day, down from its previous forecast of 90.21 million.

The Persian Gulf nation of Qatar announced the discovery of a deposit containing 2.5 trillion cubic feet of natural gas this week, Bloomberg reported, marking the country’s first gas find in 42 years. State-run Qatar Petroleum, privately held Wintershall Holding and Japan’s Mitsui & Co. (TYO:8031,OTC Pink:MITSY) plan to develop the deposit, which is located off the country’s northern coast, in the next few years.

Crescent Point Energy (TSX:CPGannounced its latest results. In the fourth quarter, the company produced a record 108,000 barrels of oil equivalent (boe) per day, up 33 percent from a year ago. Despite that gain, its loss widened to $95.2 million, or $0.26 a share, from $86.2 million, or $0.30. Average selling prices fell to $73.20/boe from $84.37 in the fourth quarter of 2011. Cash flow from operations came in at $430.4 million, or $1.18 a share, up from $381.9 million, or $1.32.

Big Sky Petroleum (TSXV:BSPacquired a 90-percent working interest in 1,100 acres next to its Midland Basin Wolfcamp prospect in Texas. This lease acquisition brings the company’s Midland Basin prospect area to over 3,400 contiguous net operated acres, of which Big Sky owns 90 percent.

Copper

The US revealed why it abstained from voting on the $4.5 billion in financing the World Bank and the European Bank for Reconstruction and Development are in negotiations to provide to Rio Tinto’s (NYSE:RIO,ASX:RIO,LSE:RIO) huge Oyu Tolgoi gold-copper project in Mongolia. Rio controls 66 percent of Oyu Tolgoi through a subsidiary; the Mongolian government owns the rest. The funding was approved in late February, but Washington said this week that it feels the mine’s environmental assessment has “gaps in critically important information,” according to The Australian. Rio is still waiting for further funding from the Mongolian government, which has raised concerns about the project’s costs.

Nevada Copper (TSX:NCU) released assay results from its Pumpkin Hollow property in Nevada this week. The company has completed three holes of its follow-up drilling program along the south edge of the property’s North deposit. Results include 179.1 meters averaging 0.54-percent copper. The highest-grade zone intersected 22.1 meters, 20 meters true thickness grading 1.5-percent copper. Nevada aims to complete an optimized feasibility study for an expanded mine at the site in April; the latest drilling targeted new mineralization outside the feasibility pit limits.

 

Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.

Related reading: 

Weekly Round-Up: Stocks Outshine Commodities

INN Video: David Grondin on TomaGold’s Projects in Quebec

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