Bears Run Wild, Gold Sinks to Four-month Low

Bears have had a field day this week, watching as gold fell to a four-month low today. Spot gold touched down at $1,251.10 per ounce, its lowest price since early February. COMEX gold for June delivery ended the day at $1,256.30, while the spot price was down $2.24, at $1,255.40.

A US gross domestic product (GDP) report, released this morning, had some worse-than-expected numbers, showing that the country’s GDP fell 1 percent. According to Reuters, economists have pointed the finger at severe winter weather. Nonetheless, the report did help alleviate some of the strain on gold in early trading.

Gold “has few supporting impulses right now and quite an arsenal of factors that collectively spell further weakness up ahead,” said UBS precious metals strategist Edel Tully. “There’s no rush from physical buyers here, rather they’re happy to wait for lower levels in what is, seasonally, a quiet time for physical demand,” Tully said, continuing, “[i]nvestor sentiment is weak, albeit contained, [and] technicals suggest further downside. Against all this, gold has a battle.”

Barrick and Pascua-Lama

While the price of gold takes a beating, the world’s top gold producer, Barrick Gold (TSX:ABX,NYSE:ABX), is hammering out the kinks at its Pascua-Lama mine in Chile. On Wednesday, the company reached a preliminary deal with a Chilean indigenous group that will hopefully get Pascua-Lama back on track.

Seated right on the Argentina-Chile border in the Andes, Pascua-Lama has been the subject of complaints as indigenous groups are concerned that the mine will threaten their water supply and pollute nearby glaciers. A year ago, the Chilean environmental regulator blocked work at Pascua-Lama on the basis of “serious” work permit violations. This week, Barrick announced that it is looking to again work on the mine, which was suspended in October 2013. The recent move, as Daily Finance explains, has given the gold miner a brighter-looking future.

Pascua-Lama holds one of the largest gold and silver resources in the world. In its first five years of production, the mine should produce between 800,000 and 850,000 ounces of gold and 35 million ounces of silver.

Company news

Midway Gold (TSX:MDW,NYSEMKT:MDW) today announced a bought deal with a syndicate of underwriters led by RBC Capital Markets and Haywood Securities. Per the agreement, the underwriters have agreed to buy 30,121,000 common shares of Midway at a price of US$0.83 per share. Proceeds from the deal total $25,000,430.

Midway plans to use the money “to fund the construction and working capital for the Pan project, Gold Rock development and permitting, and general corporate purposes.”

Canada Strategic Metals (TSXV:CJC,FWB:YXEN,OTCBB:CJCFF) and Matamec Explorations (TSXV:MAT,OTCQX:MHREF) released positive results from recent drilling on the Sakami gold project in Quebec. The results confirm the extension of gold mineralization to the west, northwest and at depth of the Zone 25 envelope. Results include hole PT-13-74, which intersected 2.3 grams per tonne (g/t) gold over 26.35 meters, including 3.8 g/t over 8.8 meters and 5.18 g/t over 4.8 meters.

Samco Gold (TSXV:SGA) signed a binding letter of intent with Pan American Silver (TSX:PAA,NASDAQ:PAAS) that will grant Pan American the exclusive option to acquire a 60-percent interest in the El Dorado-Monserrat project in Santa Cruz, Argentina. Both parties plan to participate in the exploration and development of the project.

Abacus Mining (TSXV:AME) has made modifications to the site plan for its Ajax project, located near Kamloops. According to the company, the site plan is an important adjustment to the project because it concentrates mine activities, thereby reducing the possibility of industrial activity adversely impacting nearby residents.

Key changes include a redesign of the tailings storage facility and the relocation of a waste rock storage facility, mine processing plant, primary crusher and temporary ore stockpiles.

 

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