Gold prices took a nosedive at the end of the week as the US dollar rebounded after falling heavily against other major currencies during the week.
Expectations of more quantitative easing (QE) by the Federal Reserve have kept the American currency under pressure all week, pushing it to 15 year lows against the Japanese yen and 8 month low against the euro.
The US dollar took a beating after the Federal Open Market Committee (FOMC) released the minutes of its latest policy meeting on Tuesday. The minutes revealed that the regulators were in favour of embarking on another round of QE and sooner rather than later.
In his Friday’s speech in Boston Fed Chairman Ben Bernanke supported the case for more stimulus, saying that the risk of deflation was higher than desirable and any improvements in the currently high unemployment rate were unlikely at the anticipated pace of economic growth in 2011.
Bernanke said that the Fed would like to see the inflation rate to rise from the current 1% to 2% to encourage more consumer spending.
However, Bernanke offered no timetable for another round of QE, nor did he reveal any specific measures that would be taken by the Fed to boost the slowing recovery, signalling that regulatory action was still in the planning stage and was not likely to come too soon.
Meanwhile, China’s yuan reached all time highs against the US dollar yesterday ahead of the US Treasury’s statement on China’s trade practices. The US government had to decide whether to label China as a currency manipulator.
China has been subject of increasing criticism from the US about its reluctance to move towards a more flexible exchange rate of its national currency.
The yuan is seen as grossly undervalued, keeping the value of Chinese goods low and giving its companies a competitive advantage in export markets.
However, the Treasury Department decided to postpone its decision that was initially expected yesterday until after the G20 summit on November 11 in hopes to reach an amicable resolution of the dispute instead of taking quick steps that could backfire and cause problems for American companies operating in China.
Earlier this week, Treasury Secretary Timothy Geithner urged China to allow the yuan to appreciate gradually, but significantly.
Back in June, China said it would switch to a more flexible interest rate policy, allowing the yuan to rise almost 3% against the US dollar.
After the US Treasury refrained from upping the pressure on China and Bernanke offered no details on the possible second round of QE, the US dollar rebounded with the EUR/USD rate sliding from 1.415 to 1.403, while the USD/JPY rate climbed from 81.10 to 81.44. The yuan retreated from nearly 6.65 to 6.6405 against the US dollar.
Gold, which is seen as an alternative investment to the US dollar and usually moves inversely to the greenback, pulled back from US$1,382/oz to US$1,368/oz.
The pressure on the US dollar from the expectations of further accommodative policies from the Fed seems to be past its peak, making it unlikely that the American currency will fall any further and that gold’s record setting rally can be sustained in the near term.
In addition to that, the Fed’s lack of resolution to implement more QE brings into question whether consumer prices will go up any time soon, hitting hold’s appeal as an inflation hedge.
Goldman Sachs (NYSE:GS) has recently upped its price targets for gold to US$1,400/oz, US$1,525/oz for three and six months respectively.
The investment bank’s 12 month forecast was raised to an ultra-bullish US$1,650/oz.
Silver and platinum followed gold, retreating to US$24.32/oz and US$1,690/oz respectively.
Gold prices took a nosedive at the end of the week as the US dollar rebounded after falling heavily against other major currencies during the week.
Expectations of more quantitative easing (QE) by the Federal Reserve have kept the American currency under pressure all week, pushing it to 15 year lows against the Japanese yen and 8 month low against the euro.
The US dollar took a beating after the Federal Open Market Committee (FOMC) released the minutes of its latest policy meeting on Tuesday. The minutes revealed that the regulators were in favour of embarking on another round of QE and sooner rather than later.
In his Friday’s speech in Boston Fed Chairman Ben Bernanke supported the case for more stimulus, saying that the risk of deflation was higher than desirable and any improvements in the currently high unemployment rate were unlikely at the anticipated pace of economic growth in 2011.
Bernanke said that the Fed would like to see the inflation rate to rise from the current 1% to 2% to encourage more consumer spending.
However, Bernanke offered no timetable for another round of QE, nor did he reveal any specific measures that would be taken by the Fed to boost the slowing recovery, signalling that regulatory action was still in the planning stage and was not likely to come too soon.
Meanwhile, China’s yuan reached all time highs against the US dollar yesterday ahead of the US Treasury’s statement on China’s trade practices. The US government had to decide whether to label China as a currency manipulator.
China has been subject of increasing criticism from the US about its reluctance to move towards a more flexible exchange rate of its national currency.
The yuan is seen as grossly undervalued, keeping the value of Chinese goods low and giving its companies a competitive advantage in export markets.
However, the Treasury Department decided to postpone its decision that was initially expected yesterday until after the G20 summit on November 11 in hopes to reach an amicable resolution of the dispute instead of taking quick steps that could backfire and cause problems for American companies operating in China.
Earlier this week, Treasury Secretary Timothy Geithner urged China to allow the yuan to appreciate gradually, but significantly.
Back in June, China said it would switch to a more flexible interest rate policy, allowing the yuan to rise almost 3% against the US dollar.
After the US Treasury refrained from upping the pressure on China and Bernanke offered no details on the possible second round of QE, the US dollar rebounded with the EUR/USD rate sliding from 1.415 to 1.403, while the USD/JPY rate climbed from 81.10 to 81.44. The yuan retreated from nearly 6.65 to 6.6405 against the US dollar.
Gold, which is seen as an alternative investment to the US dollar and usually moves inversely to the greenback, pulled back from US$1,382/oz to US$1,368/oz.
The pressure on the US dollar from the expectations of further accommodative policies from the Fed seems to be past its peak, making it unlikely that the American currency will fall any further and that gold’s record setting rally can be sustained in the near term.
In addition to that, the Fed’s lack of resolution to implement more QE brings into question whether consumer prices will go up any time soon, hitting hold’s appeal as an inflation hedge.
Goldman Sachs (NYSE:GS) has recently upped its price targets for gold to US$1,400/oz, US$1,525/oz for three and six months respectively.
The investment bank’s 12 month forecast was raised to an ultra-bullish US$1,650/oz.
Silver and platinum followed gold, retreating to US$24.32/oz and US$1,690/oz respectively.
Major mining stocks did well with the exception of African Barrick Gold (LON:ABG), which lowered its production guidance for the current year this week. Shares in the company declined from 616 pence at the start of the week to the current 570 pence.
Fellow gold miner Randgold Resources (LON:RRS) improved from 6,515 pence to 6,565 pence, while platinum producer Lonmin (LON:LMI) advanced from 1,819 pence to 1,831 pence and silver miner Fresnillo (LON:FRES) rose from 1,248 pence to 1,299 pence.
Midcaps followed. Gold miner Petropavlovsk (LON:POG) edged up from 1,020 pence to 1,032 pence, Aquarius Platinum (LON:AQP) moved higher from 372 pence to 383 pence and silver producer Hochschild Mining (LON:HOC) surged from 465 pence to 509 pence.
Small Cap News
Mariana Resources (LON:MARL) has struck bonanza grades of gold and silver at its project in Patagonia. The company says there is potential for high-grade gold mineralization along the 450 metre strike vein-breccia trend at Calandria Norte, part of the Las Calandrias area in Santa Cruz Province, Argentina. Meanwhile, Mariana removed another layer of risk from the Las Calandrias project by acquiring the freehold surface rights to the licence area in Patagonia.
Niger Uranium (LON:URU) has begun exploration drilling on its In Gall and Irhazer uranium licenses in Niger. The programme will evaluate three uranium targets at an estimated cost of US$650,000.
Thor Mining PLC (LON:THR, ASX:THR) has entered into an arrangement for the private placement of 57,000,000 voting CDI’s in the company to sophisticated investors at 1.6 cents, raising A$912,000 before expenses.
Red Rock Resources’ (LON:RRR) shareholding in Jupiter Mines (ASX: JMS) was boosted in value on Thursday as the iron mine developer jumped 20% on the Australian Securities Exchange.
Stellar Diamonds (LON:STEL) has increased diamond production at the Mandala mine by 31% in the third quarter from the second quarter. In the three months ended 30 September, 18,291 carats were produced at the Mandala mine in south east Guinea. The company sold 18,549 carats in the period, at an average price of US$33 per carat to generate US$609,000 in revenue. Also this week, Stellar announced that Richmond Capital now holds a 15.4% interest in the group after participating in its £1.9 million placing and its purchase of Stellar shares from Altima Partners LLP.
Medusa Mining (LON:MML, ASX:MML, TSX - MLL) expects to move up to the main board of the London Stock Exchange on 28 October 2010. The plans to move up from the AIM market were initially announced back in April. In its Daily Market Report, Fairfax called Medusa Mining a high quality gold producer delivering on promises with significant organic growth potential.
Anglo Asian Mining (LON:AAZ) reiterated its production guidance to address inaccurate press coverage in Azerbaijan. The company said it expects to produce 60,000 ounces of gold in 2010. A positive site visit and a rise in commodity prices have prompted Numis analyst Andy Davidson to raise his price target for Anglo-Asian. It moves to 70p a share from 50p - well above the current price of 43p. And it values AAZ at a middle-of-the-range 1.25 times NAV.
Kryso Resources (LON:KYS) has published a bankable feasibility study (BFS) for the Pakrut gold project in Tajikistan. The BFS currently anticipates total production of 857,000 ounces of gold and 123,000 ounces of silver over a 14-year mine life, beginning in the second half of 2012.
GGG Resources (LON:GGG) has appointed Morgan Stanley Smith Barney as broker for its upcoming listing on the Australian Stock Exchange (ASX). The Morgan Stanley Smith Barney office in Perth will act as lead advisors on the ASX share listing process, which GGG expects to complete before the end of 2010. GGG also said that it was notified by non-executive chairman Peter Ruxton and non-executive director Paul McGroary that they bought 500,000 and 440,000 shares, respectively, in the company.
Tri-Star Resources (LON:TSTR), formerly Canisp PLC, has hired a Turkish contractor to undertake a diamond drilling program at its Goynuk antimony mine with an aim to expand the known mineralised zones. The news was well received by investors as shares in Tri-Star rallied 14% after the announcement was made.
South America focused gold miner Orosur Mining (LON:OMI, TSX-V:OMI) moved decisively into profit during the first quarter of the financial year thanks to a sharp rise in the value of the precious metal. The company, which has operations in Uruguay and Chile, posted net income of US$3.5 million for the three months to August 31 compared with a loss of US$2.16 million a year earlier.
Stratex International (LON:STI) is set to fast-track the development of its prospective assets in Ethiopia and the Republic of Djibouti, after it agreed a farm-out deal with AngloGold Ashanti (NYSE:AU).
Noventa (LON:NVTA) shares are set to benefit from more liquid trading on London’s AIM market, as the securities began trading on SETS (Stock Exchange Trading System).
Conroy Diamonds and Gold (LON:CDG) shares spiked around 20% higher Monday morning after it reported successful results from a drilling program at Clay Lake in Northern Ireland. Later, however, investors' excitement had died down agein, and the stock was trading 2.4% up on the day.
Uranium Resources (LON:URA) said the initial results of phase 1 of drilling programme at the Mtonya Prospect in Tanzania confirmed the management’s geological interpretation on a district and prospect scale.
Herencia Resources (LON:HER) is a well directed and forceful junior which can benefit from metal shortages in the next cycle, said WH Ireland analyst David Hargreaves.
Large and Mid Cap News
African Barrick Gold (LON:ABG) said production in the third quarter was reduced by 10,000 ounces after 40% of its mining department was suspended on suspicion of criminal activity.
Silver producer and FTSE 250 constituent Hochschild Mining (LON:HOC) has doubled its stake in the Inmaculada gold-silver project in southern Peru to a controlling 60%. Under the terms of the agreement with joint venture partner International Minerals Corporation (TSX:IMZ), Hochschild will pay US$15 million in cash and fund all of the project’s first US$100 million of capital expenditure (capex).
Xstrata (LON:XTA) said Xstrata Nickel's Falconbridge Dominicana ferronickel complex, a nickel mining and processing operation in the Dominican Republic, is restarting operations to a planned 50 percent of installed capacity by March 2011.