Gold futures tracked higher Thursday on comments from the European Central Bank (ECB) president that the ECB will do “whatever it takes” to save the Eurozone from collapse.
Speaking at a conference in London to mark the start of the Olympic Games, Mario Draghi’s strong message of support for the common currency buoyed European stocks and sent a positive message to the Spanish bond market, with yields dropping below the critical 7 percent threshold needed for the country to be able to fund itself.
Earlier in the week, Spanish 10-year bond yields rose dangerously to over 7.5 percent on news that Murcia, a tiny Spanish province, was forced to ask the central government for aid — adding to investor fears that Spain will become the latest country to ask for bailout money.
Reuters reported Draghi saying that “the high borrowing costs that some countries must pay to fund their debt was within the ECB’s mandate for action.”
The ECB meets next week to consider new ways to tackle the seemingly intractable European debt crisis.
Draghi’s comments led to a hike in the euro and a fall in the dollar, which buoyed gold markets. The euro was trading at US$1.23 on Thursday, its strongest showing in two years.
Gold for August delivery was up $7 at $1,615.10 on the COMEX division of the New York Mercantile Exchange. While bullion was up, Kitco noted that the yellow metal was off its three-week high of $1,621.50 as short-term traders locked in profits.
China acquiring “shocking amount” of gold
Acclaimed money manager Stephen Leeb was quoted in the media as saying that China is acquiring as much gold as possible in a state of “controlled desperation.”
Leeb, who appears frequently on business talk shows and wrote the bestseller The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel, told King World News that “[the Chinese] are acquiring as much as they possibly can without tilting the markets dramatically to the upside.”
He said China mined 355 tonnes of gold, “by far the largest amount of any country,” yet “they are still buying every single available ounce they can get in the open market.”
Resource Investing News reported that central banks around the world have, since 2009, become net buyers of gold, with net purchases in 2011 exceeding 455 tonnes. That number excludes China and other countries that do not report their central bank gold purchases.
Barrick Gold (TSX:ABX,NYSE:ABX) had a tough day on Thursday, with the number one gold producer stating that it will delay, by a year, the start up of its Pascua-Lama mine, which straddles the border between Chile and Argentina. Barrick cited a 60 percent cost overrun as the reason for the delay.
“Based on information gathered to date, it is apparent that the challenges of building a project of this scale and complexity were greater than we anticipated,” CEO Jamie Sokalsky said in his first report after taking over from ousted Barrick boss Aaron Regent.
Barrick also reported a lackluster second quarter, with earnings of $780 million (75 cents per share) dropping below the 95 cents a share expected by analysts. Costs are expected to rise to $550 to $575 per ounce from the previous cost guidance of $520 to$560/oz.
In other Barrick-related news, JV partner NovaGold Resources (TSX:NG,AMEX:NG) was hammered in the markets Thursday, dropping 26 percent after Barrick announced that it will not fund its share of the Donlin gold project in Alaska. Barrick said it ”would not make a decision to construct at this time,” and NovaGold responded with a press releasing noting that due to the permitting process, Barrick has another four years before it has to make a decision on the project.
Barrick’s rival Goldcorp (TSX:G,NYSE:GG) didn’t fare much better this week, with its Q2 results showing a drop in net earnings compared to the same period last year. Goldcorp reported net earnings of $332 million or 41 cents a share compared to 52 cents a share a year ago. The loss was attributed to previously announced production shortfalls at Goldcorp’s Red Lake and Peñasquito mines, according to CEO Chuck Jeannes.
Hong Kong-listed G-Resources (HKEX:1051) said it poured its first gold at its Martabe gold-silver mine in Indonesia. The mine has a resource base of 7.86 million ounces of gold and 73.48 million ounces of silver. At full capacity the mine is expected to produce 250,000 ounces of gold per annum and 2 to 3 million ounces of silver.
Junior company news
BC-focused gold explorer Pretium Resources (TSX:PVG) reported the highest-ever gold grade at its Brucejack project in Northern British Columbia. The company announced an astounding intercept of 41,582 grams per tonne over half a meter from a downhole depth of 200.97 meters. Pretium’s stock rose to $14.75 on Wednesday before slipping back Thursday to close at $14.34 on the Toronto main board.
Miranda Gold (TSXV:MAD) said it has formed a strategic alliance with Agnico-Eagle Mines (NYSE:AEM,TSX:AEM) to explore for gold in Colombia. With a budget of no less than $1 million per year, the two companies will work together for three years with a possibility of further extension. Miranda Gold has two projects in Colombia that are currently being explored through earn-in agreements with Red Eagle Mining (TSXV:RD).
Transition Metals (TSXV:XTM) acquired two new gold projects, Golden Elk and Elephant Head, located in Ontario’s Abitibi greenstone belt. The Sudbury-based company now has seven projects and controls about 225 square kilometers of prospective land. Transition said the first results from its New Kirkland project near Kirkland Lake, Ontario have identified ”new gold occurrences and strongly altered horizons hosting semi-massive to massive sulphide.”
Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.