Gold for December delivery was up on Thursday, hitting $1,788.70 an ounce on the New York Mercantile Exchange on poor jobs numbers coming out of the United States and a signal that the European Central Bank (ECB) is preparing to buy government bonds.
Both events proved bullish for gold, which is seen as a hedge against inflationary monetary policies.
On Thursday, jobless claims in the US rose by 4,000 to 367,000 for the week ended September 29. Monthly data is expected on Friday. In Europe, ECB president Mario Draghi said the bank is prepared to buy bonds when debt-riddled countries such as Greece and Spain meet the proper conditions for a bailout.
In mid-September, the ECB initiated a bond-buying program aimed at lowering the borrowing costs of troubled Eurozone countries whose bond yields have risen to unsustainable levels. That was followed by a third round of quantitative easing — known as QE3 — whereby the US Federal Reserve will buy $40 billion worth of mortgage debt each month as it seeks to boost economic growth and reduce unemployment.
Earlier in the week, bullion moved to its highest level of the year, with spot gold touching $1,791.20 on Monday, its best performance since mid-November 2011. The gains were driven by a stronger euro and cautious sentiment ahead of key US employment data.
Jon Nadler, a senior analyst at Kitco, was quoted as saying the yellow metal is almost certain to hit the $1,800 level. ”ECB no action, jobless claims up 4,000. Not exactly the catalysts for a near 1% jump, but the bulls declare $1800 gold as being in the bag,” he wrote.
Gold equities shining
The slump in gold equities experienced by most miners and explorers appears to be waning, according to data from Dundee Capital Markets. The Canadian investment dealer said in a note on Wednesday that the S&P/TSX Global Gold Index has outperformed the spot price for one- and three-month periods. The firm issued buy recommendations and increased target prices for several gold equities, including Goldcorp (TSX:G), Osisko (TSX:OSK), Alamos Gold (TSX:AGI), Allied Nevada Gold (AMEX:ANV), Perseus Mining (ASX:PRU) and San Gold (TSX:SGR).
Gold mine unrest moves to Central Europe
The former Soviet Republic of Kyrgyzstan was the site of a mining protest on Wednesday when about 2,000 protesters stormed government headquarters in the capital, forcing police to fire tear gas to disperse them. Reuters reported that the protesters are demanding that the Kumtor gold mine, operated by Canada’s Centerra Gold (TSX:CG), be nationalized. Opponents of the foreign firm failed to win enough support in parliament this past June to bring the mine under state control.
Meanwhile, in South Africa, where platinum and gold mine strikes have paralyzed the sector and caused speculation that the price of gold may rise on production disruptions, Reuters reported that Gold Fields (NYSE:GFI) has settled a two-year-old dispute over the South Deep mine. The agreement protects existing jobs and creates an additional 400, and will cost the company $20 million in upstart costs. On the same day, the nation’s second-largest gold miner faced 2,000 striking miners who occupied a hill at the KDC West Mine to protest against being evicted from company housing. The miners are seeking a hefty pay increase.
On Wednesday, Gold One International (ASX:GDO) suspended workers at its Ezulwini mine for carrying out an illegal strike in defiance of a wage agreement signed in July. “I am disappointed that despite numerous requests to return to work, both before and after the award of the interdict, our employees have chosen to be in contempt of court and are acting without any regard for the rule of law. We are therefore without any option but to suspend these striking employees,” president and CEO Neal Froneman said in a statement.
Harmony Gold Mining (NYSE:HMY) also faced “intimidation” from workers who barricaded the entrance to its Kusasalethu mine on Thursday according to a company statement. The operation shut down Tuesday night after about 300 workers prevented the night shift from going underground.
$2.7 billion from gold sales going to poor countries
The International Monetary Fund (IMF) will distribute $2.7 billion in windfall profits from gold sales to subsidize loans to poor countries, Bloomberg reported on Wednesday. Member countries will receive a payment according to their weight within the IMF, the lending institution said, on the condition that they make at least 90 percent of the funds available to a trust fund that lends money to low-income countries, interest free.
AngloGold Ashanti (NYSE:AU) is defending itself against a lawsuit from 31 former miners who have accused the third-largest gold producer of health-related negligence. The workers say they contracted silicosis while working in AngloGold’s mines, according to Reuters.
Australian gold miner Newcrest Mining (ASX:NCM) is also in court over complaints by junior explorer Gold and Copper Resources (GCR) “regarding its exploration licences and claims of breach of confidence,” according to a report in Australian Mining. The legal action is related to Newcrest’s plan to expand its Cadia gold mine; GCR holds a number of exploration licences all within 50 kilometers of the mine.
Continental Gold (TSX:CNL) enjoyed a 7 percent bump in its share price after nearly doubling the gold resources at its Buriticá project in Colombia, the company announced on Monday. The deposit now hosts about 5.4 million ounces of gold along with silver and zinc, around a 75 percent increase over last year’s metal count.
Barrick Gold (NYSE:ABX,TSX:ABX) applied to the state of Montana to enlarge the pit at its Golden Sunlight mine in Montana, thus extending the mine’s life by two years. “The mine has applied for a layback of its south pit wall and add a second pit northeast of the Mineral Hill main pit,” The Montana Standard quoted an official from the Montana Department of Environmental Quality as saying. The expansion would add 4.2 million tons of ore for processing and extend operations to 2017 from 2015.
Junior company news
South America-focused Mariana Resources (TSX:MRY,LSE:MARL) has signed a letter of intent with Canadian company Condor Resources (TSXV:CN) to explore the Condor del Oro gold deposit in Northern Peru. The mine is about 130 kilometers west of Kinross’ Fruta del Norte gold deposit, one of the largest and richest in the world. Condor has granted Mariana two options whereby it can earn a 51 percent interest and operate the Pucayacu gold-copper property and the Yuracyacu copper-silver property.
Pacific Booker Minerals (AMEX:PBM) had a stock-jolting setback on Tuesday when the government of British Columbia rejected its plans for a copper-gold in the northwest of the Canadian province. The environment minister refused to grant the company an environmental assessment certificate due to concerns that the project would impact salmon populations and water quality in the Skeena River. Pacific Booker’s stock lost over two-thirds of its value, plummeting from $14.95 per share on Monday to $4.50 on Tuesday. It closed the day Thursday at $4.05.
Vantex Resources (TSXV:VAX) jumped 35 percent on Wednesday after the Canadian junior announced that Goldcorp founder and former chair Rob McEwen bought 500,000 shares in the company. The purchase increased McEwen’s investment to 7.8 million shares, or 12.4 percent of total shares. Vantex also said it resumed drilling on its Galloway project in Quebec, where it is exploring three gold zones.
Securities Disclosure: I, Andrew Topf, have an equity position in Goldcorp.