Gold prices were on the rise this week as safe haven demand returned amid weakness in the markets caused by concerns over the pace of the economic recovery in the US in the wake of recent statements from the Federal Reserve and a batch of disappointing jobs data released by the Labor Department over the past coupe of weeks.
This week’s jobless claims report showed an increase of 2,000 in initial claims, which reached five month highs at 484,000. Analysts polled by Reuters expected a decline to 465,000. The non-farm payrolls data released in the previous week showed a loss of 131,000 jobs in July, while June’s declines of 125,000 were revised upwards to 221,000.
This was coupled with Wednesday’s statements form the Fed, which expectedly left the current ultralow interest rates unchanged and said it would start buying US bonds to bolster the economy. Governor of the Bank of England (BoE) Mervyn King stated the recovery would be “choppy.” BoE slashed its estimates for UK economic growth to reflect the spending cuts outlines in the new government’s emergency budget.
China also contributed to gold’s rally, announcing that its CPI (consumer prices index) reached 3.3% in July, eclipsing its full year target of 3%, raising speculation that the government could soon introduce more monetary policy tightening measures to curb inflation. Earlier this month, China reported a 3.1% decline in crude imports in July.
The yellow metal reached record highs in US dollar terms at US$1,265/oz in June with the safe haven demand being driven by concerns over Europe’s debt crisis and the slowing economic recovery in the US. While Europe’s fiscal situation appears to be under control, the fears over the US economy have been reinforced by this week’s economic updates. The yellow metal has previously been supported by physical demand coming from bargain hunters that wanted to take advantage of low prices and Indian jewellers, which were buying gold ahead of the festival season in that country.
Investment bank Goldman Sachs (NYSE:GS) provided more support for gold, projecting bullion to reach US$1,300/oz within the next six months due to lingering economy fears in the markets.
Gold stood at US$1,215/oz at the end of the week, a gain of $10 over Monday’s US$1,205/oz. Other precious metals declined during the past five days with silver sliding from US$18.46/oz to US$18.14/oz, while platinum dropped from US$1,555/oz to US$1,521/oz.
Major mining stocks were in decline over the past five days with the sole exception of gold miner Randgold Resources (LON:RRS), which improved from 5,410 pence to 5,510 pence. Peer African Barrick Gold (LON:ABG) slid from 559 pence to 549 pence.
Silver miner Fresnillo (LON:FRES) declined from 1,057 pence to 1,004 pence and another FTSE 100 constituent, platinum miner Lonmin (LON:LMI), slipped from 1,557 pence to 1,484 pence.
Midcaps followed. Gold producer Petropavlovsk (LON:POG) moved down from 1,079 pence to 1,005 pence. Silver producer Hochschild Mining (LON:HOC) moved down from 320 pence to 312 pence and Aquarius Platinum (LON:AQP) declined from 268 pence to 256 pence.
Small Cap News
African Diamonds (LON:AFD) confirmed that it has received an unsolicited takeover proposal from an unnamed bidder. However the offer, at an undisclosed price, fell short of the board’s valuation.
European Nickel (LON:ENK, ASX:ENK) said Buprestid Pty Ltd, of which Mark Hanlon, finance director of the company, is a director, trustee and member, bought 50,000 European nickel shares at A$0.36 each.
Edison Investment Research was encouraged by a recent operational update from Africa operating gold and platinum miner Goldplat (LON:GDP), which it said confirmed its steady progress with both of its gold recovery plants in South Africa and Ghana operating in line with expectations, while production in Kenya is expected to commence shortly.
Berkeley Mineral Resources (LON:BMR) has conditionally placed 136.6 million shares to raise £2.05 million in order to exercise the option to secure the rights to process the remaining tailings dumps acquired at the Kabwe mine in Zambia, as announced in June.
Herencia Resources (LON:HER) has reported high-grade copper and silver assay results from surface sampling on the Doris prospect at the Paguanta project in northern Chile. The best grades from the sampling came in at 4.5% for copper, and the best silver assay was 573 grams per tonne (g/t) silver.
Finders Resources (LON:FND, ASX:FND) has rejected allegations, made by two minority shareholders who arranged project financing for the Wetar demonstration plant, that it misled the investors in relation to the development.
Gladstone Pacific Nickel Ltd (LON:GPN) has been informed by 50.04 percent shareholder Queensland Nickel Resources Pty Ltd that it plans to make an unconditional cash offer for all the ordinary shares in GPN it does not already own.
In its full-year results statement, Orosur Mining (TSX-V:OMI, LON:OMI) told investors that it significantly improved production and profitability in the fourth quarter, consequently the company swung to a net profit of US$1.4m for the full-year ended 31 May 2010.
Baobab Resources (LON:BAO) has begun a 7,000m step-out reverse circulation (RC) drilling programme on the South Zone at the Tete iron/vanadium/titanium project in Mozambique. With the next phase of work now underway, and given the successful completion of the diamond drilling phase, Baobab said it is on target to update the Tete resource inventory by the end of the year.
South Africa based coal exploration and production company Strategic Natural Resources (LON:SNRP) has announced that its chairman Richard Latham has bought a further 70,000 shares in the company to take his interest to 2.9 million shares, representing a 3.08% stake.
Kalahari Minerals (LON:KAH) noted the latest statement from its 41.14% owned uranium exploration and development affiliate Extract Resources (ASX, TSX, NSX: EXT), which reported new resource estimate, following JORC Code and Canadian NI43-101 guidelines, for the Rössing South uranium deposit in Namibia.
In a note to investors, FairFax Securities said that Medusa Mining (ASX:MML, LON:MML, TSX:MLL) “continues to demonstrate a solid reserve base” for its Co-O gold mine in the Philippines.
Large and Mid Cap News
Talks are underway between two of the London Stock Exchange’s major resource companies, with Vedanta Resources (LON:VED) confirming speculation that it may buy a stake in Cairn Energy’s (LON:CNE) Indian subsidiary - Cairn India (BOM:532792).
In its analysis on Ukraine-oparating iron-ore pellet producer Ferrexpo (LON:FXPO), Edison Investment Research took a look at the company’s strong interim results. Last week, in its interim results, Ferrexpo reported a 74% increase in revenue, a 340% increase in pre-tax profit, a 384% increase in basic EPS and a 456% increase in underlying EPS. In the wake of these triple-digital growth numbers, Edison today upgraded our earnings estimates, and said that Ferrexpo is “on course to report a record full-year set of numbers, surpassing even FY08.”