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Gold retreats, but Randgold Resources and Petropavlovsk climb, Fresnillo and Lonmin follow

Published: 15:30 17 May 2010 BST

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Gold was slightly lower, still cooling off from its recent rally, which saw the yellow metals hit all time highs at US$1,250/oz. Gold has been in demand as investors were increasingly pouring money into safe haven assets, primarily precious metals, as faith in a quick resolution to Europe’s debt crisis faded despite a €750 billion bailout recently agreed on by EU leaders to provide a cushion for euro zone members potentially facing the same situation as the one that put Greece on the brink of a default and forced the country to implement a series of austerity measures to cut spending and secure a €110 billion rescue package from the EU and the International Monetary Fund (IMF).

The euro has recently hit a four year low against the US dollar in the wake of the European debt crisis.

Gold used to be seen as an alternative investment to the US dollar and normally moved inversely to the American currency and also in tandem with the euro. Now, however, gold keeps defying this trend.

The European fiscal crisis culminated two weeks ago when a round of austerity measures introduced by Greece to comply with the demands of the European Union and the IMF and secure a multi-billion bailout package led to mass protests throughout the country that resulted in three deaths and raised questions about the viability of such measures and also about the possible impact of lower budget spending on the economies of Greece and other euro zone states facing similar problems, including Spain and Portugal.

Gold inched lower to US$1,228/oz. Other precious metals followed with silver and platinum dropping to US$19.15/oz and US$1,690/oz respectively.

Major miners were on the rise. Platinum producer Lonmin (LSE: LMI) led the way, advancing 3.5%. Randgold Resources (LSE: RRS) and silver miner Fresnillo (LSE: FRES) climbed 2.5% and 0.5% respectively.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) was unmoved.

Midcaps were mixed. Gold miner Petropavlovsk (LSE: POG) rose 2.5%, while silver producer Hochschild Mining (LSE: HOC) was down 1.8% and Aquarius Platinum (LSE: AQP) posted a marginal loss.

UK-registered China operating copper and gold miner Central China Goldfields (AIM: GGG) led the small caps with a 12.5% surge. Uzbekistan focused gold miner Oxus Gold (AIM: OXS) advanced 12% after recommencing mining at its 50% owned Amantaytau Goldfields JV in Uzbekistan. Tajikistan operating gold miner Kryso Resources (AIM: KYS) and Fiji focused gold miner Vatukoula Gold Mines (AIM: VGM) also did well, tacking on nearly 5%.

Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEF) declined 10%.

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