Gold Rises Following Fed Stimulus Cut

Gold Rises Following Fed Stimulus Cut

The results of the US Federal Reserve’s latest meeting are in: the central bank will reduce its monthly stimulus program by another $10 billion, bringing it down to $65 billion per month. 

So far that news has been good for gold, which is currently sitting at $1,267.70 per ounce, up from this week’s low of $1,250.80 and higher than the three-year low it reached in December. Meanwhile, US gold futures for February delivery on the COMEX in New York were last at $1,262.20, up 0.9 percent, The Wall Street Journal’s Matt Day said.

Reuters notes that market watchers believe the increase is due to the fact that “the Fed’s move to taper had already been fully discounted into the bullion market.” On a similar note, Day quotes Scott Carter, chief executive of Lear Capital, as saying that the Fed, “did a good job of getting the message out there the last couple of months that they were going to do this. It may have been priced into the market.”

The meeting, which is Chairman Ben Bernanke’s last, saw no changes made to the Fed’s longer-term plan to keep interest rates low, Reuters also states. Janet Yellen will take over for Bernanke on February 1.

Hedging at lowest level in 11 years

In other gold news, Societe Generale (EPA:GLE) and Thomson Reuters GFMS said in a report released Tuesday that during Q3 2013, “the outstanding level of gold sold forward by mining companies fell to its lowest level in 11 years,” as per the Financial Times.

The point of selling production forward — or hedging — is to “guarantee future revenues and guard against a falling price,” the news outlet explains. The news may thus surprise those market watchers who expected a return to hedging during last year’s gold price slump.

However, Societe Generale and GFMS seem to think that 2013′s fourth quarter will reveal similar results. Their report states, “[d]uring 2013, producers have focused on protecting margins through cost-containment initiatives. We therefore expect net dehedging to have been sustained throughout the duration of 2013,” according to Platts.

Company news

On Tuesday, Endeavour Mining (TSX:EDV,OTCQX:EDVMF,ASX:EVR) announced that it has achieved commercial production at its Agbaou gold mine, commenting that the mine is forecast to put out from 85,000 to 95,000 ounces of gold during the first year of its eight-year mine life.

The company followed that news up today by revealing that in 2013 it produced a record 324,275 ounces of gold, 6,132 of which came from Agbaou. This year, Endeavour anticipates putting out 400,000 to 440,000 ounces of gold at an all-in sustaining cost per ounce of $985 to $1,070. 

Junior company news

Starting off the week on a high note, Cosigo Resources (TSXV:CSG) received assay results from 15 reverse-circulation drill holes completed at its Colombia-based Machado project. Highlights include an intercept of 17.19 grams per tonne (g/t) gold over 3.04 meters from 68.58 meters “down hole depth in drill hole13MR007, which ended in mineralization.”

The same day, Eurasian Minerals (TSXV:EMX,NYSEMKT:EMXX) provided 2013 year-end exploration results from its Akarca gold-silver project, stating that results include an oxide drill intercept of 68 meters averaging 3.43 g/t gold and 34.71 g/t silver, with a high-grade sub-interval of 4 meters averaging 52.87 g/t gold and 530.43 g/t silver. Akarca is located in Turkey.

The next day, Integra Gold (TSXV:ICG) announced the completion of mineral resource estimates on two further targets at its Lamaque gold project, which is situated in Quebec. Lamaque’s global indicated resource now sits at 756,280 ounces, a 14-percent increase, while its inferred resource rose 9 percent, to 293,710 ounces.

Also on Tuesday, Colorado Resources (TSXV:CXO) released the first inferred resource estimate for its North ROK project in British Columbia. Commenting positively on the news, Adam Travis, the company’s president and CEO, said, “[i]n less than 9 months since we announced our discovery drillhole on April 25, 2013 we have now released the first inferred resource estimate containing over a million ounces of gold and nearly 700 million pounds of copper.”

Wednesday, Corvus Gold (TSX:KOR,OTCQX:CORVF) said it will begin an “aggressive” exploration drill program at its North Bullfrog project, located in Nevada, in early February. During the initial phase, whose objective is to “expand the Yellowjacket deposit along strike and at depth,” 4,000 meters of drilling will be completed.

A second phase comprised of 15,000 meters of drilling should start in late May.


Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.