Seasonally-low volumes due to summer doldrums in western markets had bullion traders pausing to push their buy and sell buttons this week. That, combined with uncertainty as to whether central banks are going to stimulate lagging economies, had gold trading in a tight range of less than $10.
Gold for December delivery settled at $1,612.80 on Tuesday and then advanced for the third time in four sessions on Wednesday on speculation that the European Central Bank will produce a plan to shore up flagging Spanish and Italian bonds, and hopes that Japanese and Chinese central banks will turn to monetary instruments.
On Thursday, bullion continued to climb on signs of weakness in China’s manufacturing sector combined with higher crude oil prices and a rising US dollar.
Factory output in the world’s largest copper- and gold-consuming nation hit a three-year low in July as industrial production for that month rose 9.2 percent compared to a 9.5 percent increase in June, Beijing reported. The news led investors to speculate that China could act to stimulate its economy in order to meet its 7.5 percent annual growth target.
“Gold and silver are a bit higher on expectation of more QE after the weaker Chinese data, and they are getting some technical buying as prices stay above $1,600,” Reuters quoted Phillip Streible, a senior commodities broker at futures brokerage R.J. O’Brien, as saying.
QE stands for quantitative easing and refers to central banks increasing the money supply by buying government bonds, thereby keeping interest rates low. QE, however, is inflationary, and makes gold attractive as an investment.
At the end of Thursday’s session, COMEX gold futures were trading higher, with gold for December delivery up $3.90 to $1,619.90 per ounce. Spot gold was up $4.90 to $1,618/oz.
Mexico wins for gold production
Mexico, a mining nation commonly known for silver, announced on Monday that it hit a new record for gold production in 2011. The country’s Chamber of Mining said 88.6 tons of the precious metal was mined that year, 22 percent more than in 2010. Mexico has the highest rate of growth in Latin America, states a report summary published in Spanish-language newspaper La Prensa.
But in South Africa and Russia, both major gold producers, output dropped. Bloomberg said Russia’s gold production in the first half fell 2.4 percent to 79.2 metric tons, led by a drop at Kinross Gold’s (TSX:K,NYSE:KGC) Kupol gold mine in the Chukotka region. South African gold output dropped 4 percent even as total mineral production grew 4.2 percent, according to Statistics South Africa. The sector has been struggling for months as “…geological constraints and peak gold production continues to take its toll on South African gold mining output,” The Market Oracle reported.
Canadian metals miner Yamana Gold (TSX:YRI,LSE:YAU,NYSE:AUY) blamed a 77 percent drop in second-quarter profits on lower metals prices and copper sales volumes. South America-focused Yamana reported a net income of $42.9 million, or six cents per share, compared to a $194 million profit in the year-ago quarter. Quarter-to-quarter revenues were also down, from $573 million to $536 million, as was gold production, which fell by about 10,000 ounces to 278,737 oz.
AngloGold Ashanti (NYSE:AU), the world’s third-largest gold producer and Africa’s largest, was also plagued by poor second-quarter results. The South African company said its quarterly profit fell to US$287 million from $470 million a year ago due partly to rising capital expenditures. However, AngloGold chief executive Mark Cutifani was quoted as saying that “the company plans to spend US$2.2 billion on new and existing projects this fiscal year — a figure it expects to rise again in 2013.”
West Africa-focused Randgold Resources (LSE:RRS,NASDAQ:GOLD) said it poured record gold from its flagship Loulo-Gounkoto mine in Mali, despite a coup in the country in March. Bullion production at the mine went from 324,114 ounces in the first half of 2011 to nearly 376,000 ounces in H1 2012, a 16 percent increase. Q2 profits were up 36 percent compared to the same period last year, while overall production was up 27 percent, Randgold said.
Canada-based gold majors Kinross Gold and Goldcorp (TSX:G,NYSE:GG) shuffled their boardroom chairs on Thursday. Kinross, which last week replaced CEO Tye Burt with Paul Rollinson, said it appointed Brant Hinze to the chief operating officer position. Geoffrey Gold and James Crossland were also given new roles at the company. Goldcorp, the world’s number two gold producer behind Barrick (TSX:ABX,NYSE:ABX), also appointed a new COO. George Burns, currently heading Goldcorp’s operations in Mexico, will replace Steve Reid, who is leaving the company.
Endeavour Mining (TSX:EDV,ASX:EVR,OTCQX:EDVMF) is buying Avion Gold (TSX:AVR) for $389 million in an all-stock deal that should boost Endeavour’s gold production up to about 300,000 ounces a year. The deal valued Avion stock at 88 cents per share, a 57 percent premium on the company’s Tuesday closing stock price. Endeavour will also provide a $20 million bridge loan to Avion to expand its mill at the Tabakoto mine in Mali, Mineweb reported.
Junior company news
Brazilian Gold (TSXV:BGC) announced an inferred resource of 336,000 ounces of gold at its Boa Vista gold mine in Brazil. The company’s first NI 43-101 compliant resource estimate shows the gold contained in 8.47 million tonnes of ore graded at 1.23 grams per tonne gold. The deposit is open at depth and along the strike length.
Teras Resources (TSXV:TRA) reported high-grade assay results from its Cahuilla gold-silver project in California, with 39.35 grams per tonne found over 1.5 metres. “Teras is again very pleased with drill results from our most recent round of drilling. The Company is achieving its main objective of enhancing known mineralization as demonstrated by the receipt of additional disseminated and high grade gold/silver assay results highlighted by the values encountered in CAH-241,” the company said in a statement.
Securities Disclosure: I, Andrew Topf, own stock in Goldcorp.