Gold surged this week after the Federal Reserve announced a US$600 billion stimulus package in an attempt to boost the slowing recovery by driving up inflation to create more jobs and encourage Americans to up spending.
Investors were expecting the Fed to buy US$500 billion worth of Treasuries. Such a massive injection of money into the economy would lead to higher inflation, pushing down the US dollar’s value.
The anticipation of more QE was driving gold, which is seen as an inflation hedge and an alternative investment to the US dollar.
However, precious metals were hit by a report in the Wall Street Journal suggested that the Federal Reserve may opt for a smaller stimulus, limiting it to a few hundred billion over a few months.
Yet the actual stimulus announced by the Fed topped expectations, driving up commodities.
As was expected, the US dollar hit multi-month lows against a basket of other major currencies after the Fed unveiled the fresh stimulus package.
Spot gold prices jumped US$30 immediately after the Fed made the announcement and rose further on Friday, nearly reaching the US$1,400/oz plateau.
The data released by the US Labor Department yesterday showed that non-farm payrolls rose 151,000 in October; however, the unemployment rate was unchanged at 9.6%. on Thursday, the Labor Department said that initial jobless claims unexpectedly rose 20,000 to 457,000 last week.
The yellow metal started the week at about US$1,350/oz before getting a boost from a decline in the US dollar resulting from Australia’s decision to hike its interest rates from 4.5% to 4.75%.
Gold last traded at US$1,394/oz. Silver reached US$26.76/oz, while platinum declined to US$1,767/oz.
Mining majors were buoyant this week. Platinum producer Lonmin (LON:LMI) advanced from 1,749 pence to 1,866 pence and silver miner Fresnillo (LON:FRES) climbed from 1,250 pence to 1,413 pence.
Randgold Resources (LON:RRS) rallied from 5,825 pence to 5,940 pence, while fellow gold producer African Barrick Gold (LON:ABG) rose from 545 pence to 549 pence.
In the FTSE 250, gold miner Petropavlovsk (LON:POG) went against the tide, sliding from 968 pence to 943 pence after slashing its gold production guidance for 2010.
Other midcaps did better.
Aquarius Platinum (LON:AQP) surged from 360 pence to 394 pence, while Hochschild Mining (LON:HOC) advanced from 484 pence to 545 pence.
Mining Industry News
Small Cap News
Avocet Mining (LON:AVM) upped total gold output by 28 percent in the third quarter from the second, to produce 67,792 ounces of gold.
Norseman Gold (LON:NGL, ASX:NGX) said that its director and chief executive Barry Cahill purchased 101,000 shares for A$100,179, taking his total shareholding to 5.3 million shares.
Nyota Minerals Ltd (LON:NYO, ASX:NYO) is planning to announce a further drilling update from its flagship Tulu Kapi gold project in Ethiopia to the market before the end of 2010.
Pan African Resources (LON:PAF, JSE:PAN) is ready to start building a tailings plant at International Ferro Metals’ (LON:IFL) Lesedi mine in South Africa. The company told investors it has now concluded the formal agreement with IFM, and plant construction will begin immediately.
Churchill Mining (LON:CHL) said the quest continues to find a partner to help the company finance the East Kutai Coal Project (EKCP) in Indonesia. It has employed Credit Suisse to find what managing director Paul Mazak recently called a “big brother with deep pockets” to fund the development of the mine, which has a net present value of US$1.3 billion. Northland Capital Partners said that even with aggressive discounts and modest coal price projections, 25% of the East Kutai project would be worth nearly double Churchill Mining’s current share price.
Weatherly International (LON:WTI) is set to restart copper production in the first quarter of 2011, after it satisfied the conditions of the US$7 million funding facility being provided by Louis Dreyfus Commodities.
Edison Investment Research issued an upbeat note on Baobab Resources (LON:BAO) in light of its latest drilling results, highlighting that the stock is trading at a substantial discount to the value of its mineral resources.
The survey results from Mariana Resources’ (LON:MARL) Las Calandrias project offer tantalising information on the value that drilling could potentially deliver over the next three months, according to finnCap analyst Joe Lunn. Mariana has commenced the second round of drilling at the Calandria Norte gold-silver target after successfully completing drilling at Calandria Sur ahead of schedule.
Patagonia Gold (LON:PGD) shares soared over 20 percent after it reported the latest batch of drill results which revealed “exceptionally high grade” gold and silver from its COSE project in Argentina.
Solomon Gold (LON:SOLG) chairman Cameron Wenck believes there is an opportunity for the company to grow and mature into an integrated gold company. In the company’s final results statement Wenck highlighted that Solomon’s projects range from lower risk and more advanced prospects in Queensland, through to high-risk high-reward projects on Guadalcanal and Fauro Island.
Eurasia Mining (LON:EUA) has raised £1.3 million to support the development of the newly extended West Kytlim license in Russia. The placing was arranged by WH Ireland, and the company is issuing 132 million new shares at 1 penny each.
African Aura Mining (LON:AAAM,TSX‑V:AUR) has hired a project manager to oversee the New Liberty gold deposit in western Liberia. Dr Martin White will manage the development of the 1.4 million ounce New Liberty gold project. African Aura's shares rose nearly 8 percent to trade at 160 pence following encouraging trenching results from the Ndablama gold prospect in western Liberia. So far data from the Bea Mountain licence area has suggested the potential for a significant new gold province. Shares in the company last traded at 163 pence.
This week, African Aura appointed David Reading as a non-executive director to the board with immediate effect.
Strategic Natural Resources PLC (LON:SNRP) has appointed Edward Cox as new finance director with immediate effect to succeed Elizabeth Shaw.
Metminco (LON:MNC, ASX:MNC) said it can now accelerate exploration activity, after it agreed a deal to take full control of Hampton Mining and raised A$30 million in the third quarter.
Forte Energy (ASX:FTE, LON:FTE) expects to up resources at key uranium projects in 2011 after making strong operational progress during the quarter to 30 September.
European Nickel (LON:ENK) summed up its activities for the quarter to 30 September and said that the signing of the forestry permit for its key Çaldağ nickel project in Turkey is imminent.
Large and Mid Cap News
Equipment delivery delays and adverse weather conditions in Russia’s Far East have forced Petropavlovsk (LON:POG) to cut its output forecasts yet again, pushing the share price down 4.5% after the announcement was made.
Ferrexpo (LON:FXPO) has increased production significantly year-on-year, with more than 15 percent more iron pellets being produced in the year to date. In a monthly production update Ferrexpo said that October had the second highest production of 2010, with 891,000 tonnes of iron pellets produced.