A Bullish Day for Gold

A Bullish Day for Gold Gold prices climbed to near three-week highs on Thursday supported by several factors. However, investors seemed most interested in buying after the Federal Reserve released its minutes on Wednesday afternoon, which were more subdued tone than previously expected.

The yellow metal has been under some pressure in recent weeks with investors concerned that the Federal Reserve would be raising interest rates sooner rather than later. However, following their latest meeting, the Fed signaled that it was unlikely to raise interest rates until sometime in 2015.

“The Fed seems to be easing their tone a little bit, and it’s creating an environment for gold to do better,” said Sterling Smith, a futures specialist at Citigroup in Chicago told The Wall Street Journal.

Also lending some support to the yellow metal on Thursday was a renewed interest in gold as a safe haven investment and a weaker U.S. dollar.

Gold pulled away from U.S. equities on Thursday, possibly due to worries about mounting tensions between Russia and the Ukraine. As Kitco‘s Jim Wyckoff speculated that tensions between the two nations could quickly escalate and become a “geopolitical flash point.” Ever the glutton for geopolitical tensions, gold could see some increased safe haven demand should the conflicts get worse.

Spot gold prices were up 0.6 percent, to $1,319.65 per ounce, having reached an intraday high of $1,324.40. Meanwhile, gold futures for June delivery were up $14.60, or 1.1 percent, settling at $1,320.50 per ounce on the COMEX division of the New York Mercantile Exchange. The yellow metal recovered on from Wednesday when it closed down 0.2 percent, at $1,305.90.

Wyckoff explains that bears for gold in June still have a near-term technical advantage, however, if the yellow metal can end the week on a high, bulls will have better upside technical momentum. The yellow metal’s next resistance to break through is a close above $1,350 while the bears would be looking for support below the $1,300 mark at $1,277.40.

Fawad Razaqzada, technical analyst at Forex.com, told MarketWatch that “[g]old is currently testing the key $1,320 resistance level and so there is a chance it may struggle here — at least in the short term anyway.”

Goldcorp ups the ante

Osisko Mining (TSX:OSK) was convinced that Yamana Gold (TSX:YGI) would be its ‘white knight‘, saving it from mining giant Goldcorp’s (TSX:G) mid-January hostile takeover bid $2.6 billion bid. Unfortunately, the Montreal-based mid-tier gold miner underestimated just how interested Goldcorp really was. Instead of walking away from the bid, like Osisko initially expected, Goldcorp upped its bid by $1 billion, trumping the Yamana deal by 1 percent.

The now $3.6 billion bid from Vancouver’s Goldcorp places Osisko in an interesting position: that Goldcorp’s clean take over cash and stock bid or take the more complicated Yamana deal, which Osisko overall prefers.

As the Financial Posts highlights, investors must decide what they see as the new value of Osisko would be following the 50/50 transaction with Yamana. Currently, the Yamana deal values Osisko at $7.60 per share, which is quite comparable to the new Goldcorp deal that values the company at $7.65 per share.

According to comments from Goldcorp’s chief executive, Chuck Jeannes, the mining giant was open to friendly negotiations with Osisko until Thursday. However, that is no longer the case as Goldcorp is already offering a “friendly bump” in the new bid.

Company news

Nighthawk Gold Corp (TSXV:NHK) reported assay results from 16 historical holes drill in 1987 on the Cass gold deposit located on the company’s Indin Lake Gold Property in the Northwest Territories. the companies most notable intersects were 80.70 meters of 4.53 g/t gold and 61.50 meters of 4.24 g/t gold.

Teranga Gold (TSX:TGZ, ASX:TGZ) announced a bought deal financing for $30 million with a syndicate of underwriters who will purchase 36,000,000 common shares at a price of $0.83 per share. The deal is being led by Cormark Securities.

Colombian Mines (TSXV:CMJ,FWB:X6C) will be mobilizing the equipment and field crews required for drilling at the El Dovio project in Colombia. The company plans to expand on the highly successful 2013 drill program. The 2014 program will consist mostly of step-out drilling to expand know mineralization at Sabana Blanca. Down dip as well as initial drill testing of the Platanillal and Brazo zones will also be targeted.

Rye Patch Gold (TSXV:RPM) provided investors with an updated on the royalties earned from its holdings at the Coeur Mining (NYSE:CDE) Rochester Mine in Nevada. The company holds a 3.4% net smelter return on all gold and silver ounces produces and sold. For the first quarter of 2014, the Rochester mine placed 3.65 million tons of material on its leach pads, a 16 percent increase from Q4 2013. The company also saw average silver and gold grades of 0.59 opt silver and 0.003 opt gold, a 5 % increase in silver grades and 50% increase in gold grades from the previous quarter.

Also this week, Coronet Metals (TSXV:CRF,FWB:2CM,OTCQX:CORMF) announced that it had toll-processed roughly 60-tons of concentrate from its third-party supplier in Colorado since the first gold pour at its Liberty gold processing facility located in Nevada. The company has addressed with the bulk of the mechanical issues related to the commissioning plant, however, the Colorado feed material is metaphorically complex and has proven challenging to commercially sustainable operations.

 

Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.