Gold prices advanced this week, surging from US$1,327/oz to the current level of nearly US$1,360/oz.
Uncertainty over the size of the next round of quantitative easing that is expected to be announced after the conclusion of the next policy meeting of the Federal Reserve on 3 November encouraged investors to pour more money into safe haven assets, driving up demand for gold.
Friday's eocnomic data was mixed and equity markets in the UK and the US closed flat. The US Commerce Department said that GDP rose at an annualised rate of 2% in 3Q, while the University of Michigan consumer sentiment index for October was unexpectedly revised downwards from 67.9 to 67.7 and the Chicago Purchasing Managers Index beat expectations, rising from 60.4 in September to 60.6 in October.
The GDP figures met expectations, but still showed a rather slow economic expansion, supporting the case for further stimulus.
Gold rose at the start of the week after the meeting of G20 finance ministers that concluded in Seoul on weekend failed to work out an agreement on targets for current account imbalances, prompting investors to sell the US dollar.
The US urged the group of 20 to put a limit on imbalances in current accounts at 4% of the GDP, encouraging countries to rely on domestic sources of growth.
Instead, the G20 group issued a statement in which it pledged to move to “more market determined exchange rate systems” as well as reduce excessive imbalances in their current accounts.
The US dollar index, which measures the greenback’s strength against a basket of six other major currencies, continued falling, boosting gold’s appeal as an alternative investment.
The yellow metal reached US$1,350/oz as Goldman Sachs (NYSE:GS) analysts said that the Fed could be forced to undertake asset purchases of US$2 trillion, starting with a US$500 billion six month stimulus programme following next week’s policy meeting.
A large quantitative easing programme would drive up consumer prices to encourage spending, increasing gold’s appeal as an inflation hedge, while weakening the US dollar further.
However, gold failed to hold on to that level after a report in the Wall Street Journal dented expectations of a US$2 trillion dollar QE, suggesting that the Fed would likely go for a smaller stimulus package of about a few hundred billion spread over a few months to give it more leverage and minimise policy risks.
The US dollar index surged about 0.6% after the report was released, while gold dipped below US$1,330/oz.
In a recent speech, Federal Reserve Chairman Ben Bernanke supported the case for more QE, but gave no indication of what the timing and the size of the bond purchases would be.
The Fed is targeting a lower unemployment rate, which currently stands at nearly 10%, and higher inflation that would encourage Americans to spend more.
Other precious metals followed silver improved from last Friday’s close of US$23.29/oz to US$24.56/oz, while platinum climbed from US$1,673/oz to US$1,707/oz.
Most major mining stocks fell this week. African Barrick Gold (LON:ABG) declined marginally, moving from 548 pence to 545 pence, while fellow gold producer Randgold Resources (LON:RRS) dropped from 5,970 pence to 5,825 pence.
Platinum miner Lonmin (LON:LMI) retreated from 1,796 pence to 1,749 pence, while silver miner Fresnillo (LON:FRES) was unchanged at 1,250 pence.
In the FTSE 250, gold miner Petropavlovsk (LON:POG) slid from 1,010 pence to 968 pence and Aquarius Platinum (LON:AQP) fell from 365 pence to 360 pence.
Silver producer Hochschild Mining (LON:HOC) outperformed the sector, advancing from 465 pence to 484 pence.
Mining industry news
Minera IRL (TSX:IRL, LON:MIRL, BVL:MIRL) said it will raise C$32.65 million, or £20.15 million, as it has now priced up its equity offering. The initial details of the fundraising were announced last week and with 28.3 million shares being issued at C$1.15 each, Minera will raise 2.65 million more than the C$30 million it previously expected.
Anglo Asian Mining (LON:AAZ) emerged among AIM's top risers after it reported a significant 31 percent upgrade to its gold resource in Azerbaijan.
Stratex International (LON:STI) chief executive Bob Foster believes that the new joint venture with AngloGold Ashanti (NYSE:AU) may prove to be transformational. The company signed a binding ‘heads of agreement’ with AngloGold’s joint venture company Thani Ashanti earlier this month. It covers a 2,780 square kilometre land position in the Afar Depression, straddling Ethiopia and the Republic of Djibouti. This week, Stratex International said that it has defined significant extensions to three gold mineralised zones at its Hasançelebi project in central Turkey, following results of an eleven hole drilling program.
Medusa Mining’s (LON:MML) latest drilling campaign at the Co-O Mine in the Philippines has yielded some impressive results as well as uncovering a new vein set. Named the North Tinago Veins and located to the north of the Royal Vein set the company is currently mapping out this new system. Medusa has delivered on its quarterly production targets, with 25,004 ounces of gold produced at a US$187 per ounce cash cost.
Fairfax analyst Marc Elliott believes that African Aura Mining (LON:AAAM) has a considerable and diverse asset base. The analyst has just returned from a site visit in Liberia with an upbeat outlook for the AIM-listed mine developer. Elliot visited the Putu Iron ore project and the New Liberty Gold Project, as well as African Aura’s tenement package in Liberia.
Eurasia Mining (LON:EUA) was successful in its bid to extend the exploration license at West Kytlim, allowing it to fully explore further platinum discoveries made in the area.
Frontier Mining’s (LON:FML) upcoming JORC resource estimate for the Benkala project will provide the next key catalyst to re-rate its valuation , according to Edison Investment Research analyst Charles Gibson.
Ariana Resources (LON:AAU) has increased the Kiziltepe JORC resource by 25 percent, taking it to 232,900 ounces of gold equivalent. Total Measured and Indicated resources were increased to 206,500 ounces of gold equivalent.
Oxus Gold (LON:OXS) revealed a sharp financial improvement at its 50%-owned Amantaytau Goldfields (AGF) joint venture in the third quarter. AGF resumed production at the Nukrakon heap leach silver/gold mine in May 2010.
West Africa-focused Cluff Gold (LON:CLF, TSX:CFG) said it is raising US$15 million to fund a more aggressive gold exploration drilling campaign in Burkina Faso and the Ivory Coast and to further develop opportunities at its Baomahun project in Sierra Leone.
Mariana Resources (LON:MARL) has commenced deep drilling at the La Borita copper prospect in Argentina targeting a “most attractive” concealed porphyry copper deposit.
Nyota Minerals (LON:NYO, ASX:NYO) gave a report of its activities during the past quarter, which saw further positive drill results and indications of lower costs at its flagship Tulu Kapi gold project.
Finders Resources (LON:FND, ASX:FND) told investors that the Wetar project’s demonstration plant in Indonesia is operating as forecast and on budget, with 341 tonnes of copper cathode being produced in the third quarter ended 30 September 2010.
Ovoca Gold (LON:OVG) chief executive Tim McCutcheon believes that the significant results from the Stakhanovsky gold project in Russia provide optimism for 2011's drilling.
Forte Energy (LON:FTE, ASX:FTE) has commenced reverse circulation (RC) drilling at the A238 uranium anomaly in Mauritania and expects the programme to allow JORC compliant resource for the prospect to be calculated in H1 2011.
Norseman Gold (LON:NGL, ASX:NGX) said that gold production was in line with its expectations in the first quarter, and the OK Decline is expected to produce ore from stoping this month.
Sable Mining (LON:SBLM) has tapped into prospective iron ore areas in Liberia via the acquisition of significant interests in two reconnaissance licences in the country.
Strategic Natural Resources (LON:SNRP) shares surged over 13 percent after it told investors that the coal produced from the Elitheni mine will have a number of suitable markets.
Goldplat (LON:GDP) shares were boosted with positive drilling results confirming the potential of the Nyieme gold project in Burkina Faso.
Thor Mining (LON: THR, ASX:THR) shares rose 8% after the publishing of its quarterly update, in which it reflected on progress at the Dundas gold project.
Baobab Resources (LON:BAO) has secured a three year equity line facility (ELF) of up to £5 million, allowing it to accelerate the current drilling programme at its Tete iron-vanadium-titanium project that has produced “encouraging results”.
Shares in North River Resources (LON:NRP) soared almost 15 per cent after the Namibia and Mozambique-focused miner issued a generally upbeat progress report.
Collins Stewart called GGG Resources’ (LON:GGG) key Bullabulling gold project in Australia a very interesting asset with a significant exploration upside.
Beowulf Mining (AIM: BEM) announced that drilling has begun on its Kallak South iron ore deposit in northern Sweden with assay results expected by the end of the year.