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Gold and silver rise to boost Randgold, Petropavlovsk, Fresnillo and Hochschild

Published: 22:59 18 Jun 2010 AEST

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Gold prices have been on the rise this week, reaching US$1,247/oz on Friday as investors were still pouring money into safe-haven assets amid uncertainty about Europe’s debt woes. The yellow metal is now close to its record highs of US$1,252/oz posted earlier this month.

Spain has been a concern since it was reported that the country could soon seek financial aid and resort to a Greek-style bailout to tackle its fiscal problems. This was later denied by the European Commission, however, Spain did admit that its banks had limited access to the interbank credit market. European banks have been reluctant to grant loans to each other after the European Central Bank (ECB) warned last month that debt write downs by Europe’s banks would increase by another €195 billion this year to take the total to €639 billion.

Limited credit could undermine the ongoing economic recovery in Europe and exacerbate the debt problems experienced by a number of euro zone states, including Portugal and Spain, which have both been recently downgraded by high profile rating agencies.

These fears have been mitigated by Spain’s successful debt auction that raised it some €3.5 billion in an oversubscribed offering. However, the bonds were sold at much higher yields than at a previous auction held in May.

This week’s disappointing economic data added to the appeal of gold as a safe haven asset. Initial jobless claims were shown to have increased to 472,000 last week instead of an expected decline. Philly fed index update also disappointed investors, showing a decline from 21.4 to 8 in June to reflect lower industrial activity in the Philadelphia Federal Reserve region.

Silver followed gold, rising to US$18.78/oz, while platinum inched lower to US$1,561/oz.

Mining stocks were in demand today. Silver miner Fresnillo (LON:FRES) and platinum producer Lonmin (LON:LMI) climbed 3.2% and 3%, while gold miner Randgold Resources (LON:RRS) added 2%.

Specialty chemicals firm Johnson Matthey (LON:JMAT) tacked on 2.1%.

Aquarius Platinum (LON:AQP) led the midcaps with a gain of nearly 4%. Gold producer Petropavlovsk (LON:POG) rose 2.2% and silver producer Hochschild Mining (LON:HOC) posted a marginal decline.

Africa operating gold miner GMA Resources (AIM: GMA) and UK-registered Australia operating miner GGG Minerals (LON:GGG) led the juniors, advancing 9% and 7% respectively. Turkey and Ethiopia operating gold miner Stratex International (AIM: STI) and African focused nickel and gold exploration and development junior Nyota Minerals (AIM & ASX: NYO) rose 6.5% and 5.5%.

Commodity asset development company Mercator Gold (LON: MCR) slipped 22% on no news, while junior diamond miner Stellar Diamonds (LON:STEL) lost 11%. Kyrgyzstan focused gold explorer and developer Chaarat Gold Holdings (AIM: CGH) retreated 8.7%.

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