After enjoying an ephemeral no-taper rally, gold started the
last week on a low note on fresh jitters surrounding the prospect
of a reduction in monetary stimulus. Lacking significant
geopolitical and economic developments earlier in the week, the
market continued to regurgitate the Fed's decision to cling to
its $85 billion a month bond-buying program.
While the week saw gold's volatility, the metal eventually
ended in positive territory after gaining on Friday on U.S.
government shutdown fears.
The Week That Was
Gold closed lower last Monday on continued speculation that a
stimulus cut could take place before this year. Following St.
Louis Fed President James Bullard's comment that a tapering could
happen at the next Fed meet, market received more views from
other Fed officials, although in a contrarian tone.
William Dudley, President of the New York Fed, said that the
economy lacks enough momentum to substantiate a tapering. Atlanta
Fed President Dennis Lockhart shared similar view stating that
the American economy may have become less dynamic.
Gold prices extended their losses on Tuesday as the metal
continued to be bogged down by fresh tapering fears.
Nevertheless, prices got some support from uncertainties
surrounding U.S. budget and debt ceiling, which helped the metal
to recoup some of the losses for the day.
Snapping a three trading session losing streak, gold prices
marched higher the next day as the U.S. dollar fell against a
basket of other key currencies on threat that the fiscal gridlock
in Washington may shutdown the government for the first time
since 1996. Somewhat soft housing and durable goods order data
also contributed to the greenback's fall. Gold prices also got a
boost from short covering.
Treasury Secretary Jack Lew warned that the U.S. will hit the
debt ceiling by Oct 17 unless Congress passes a bill to extend
the country's $16.7 trillion borrowing limit. A failure to act by
that deadline will see the Treasury run out of cash to pay bills,
placing the nation at a risk of sovereign debt default. Shutdown
and debt default woes burnished the safe-haven appeal of
Bullion moved south on Thursday as traders considered a
cascade of mixed economic reports. Data showed a fall in initial
weekly jobless claims to near-six year low (at 305,000).
Moreover, Commerce Department figures (third estimate) showed
that the U.S. GDP rose at a 2.5% annual rate in the second
quarter, in line with the second estimate released in August but
lower than 2.6% predicted by economists. Data also showed that
pending home sales clipped 1.6% last month, marking a fall for
three straight months.
However, a 1.1% gain on Friday helped gold to wrap up the week
in the green. Prices got a lift from possibility of a government
shutdown coupled with a comment by the President of the Chicago
Fed Charles Evans, who said that tapering may not take place
until next year.
Gold prices (for December delivery) on the New York Mercantile
Exchange's Comex division crept up 0.5% for the last week to
close at $1,339.20 per troy ounce last Friday. Silver, however,
finished the week lower with a roughly 0.5% fall to $21.83 per
Both metals remain in the bear market with prices trending
roughly 25% and 38% below their 52-week highs, respectively.
Shares of most major mining stocks closed the week in
The AMEX Gold Bugs Index moved down 1.2% last week while the
Philadelphia Gold and Silver Index and the NYSE Arca Gold Miners
Index shed 2.1% and 2.2%, respectively. This compares to a
roughly 1.1% loss for the S&P 500.
Stocks in the News
Among key developments last week,
) CEO Jamie Sokalsky, at the Denver Gold Forum, hinted that the
gold giant is planning to sell additional assets in Australia, in
line with its objectives to trim costs and divest mines with
shorter life. Moreover, the company is reportedly considering a
joint venture with
) in Nevada to explore means to cut costs.
Moreover, Barrick got a respite after the Supreme Court of
Chile issued a ruling which upheld the environmental approval for
the key Pascua-Lama project in Chile. The ruling requires Barrick
to complete the project's water management system according to
its environmental permit to the satisfaction of Chile's
Newmont is reportedly seeking acquisitions to add low-cost
gold or copper output. Its CEO Gary Goldberg, at the Denver Gold
Forum, said that the company will look for mines having longer
life and lower costs. Moreover, the company is reportedly laying
off 56 employees in Nevada amid rising costs and pricing
South African miner
) said that its Kibali gold mine in the Democratic Republic of
Congo has produced its first gold ahead of schedule and within
budget. AngloGold and
) hold a 45% stake each in the mine with state-owned Sokimo
owning the balance. AngloGold also reported early gold production
from Tropicana gold mine in Western Australia.
) showed its interest in securing a streaming contract from
Glencore Xstrata Plc for future output of precious metals from
the latter's Las Bambas copper mine in Peru. The miner views the
contract would add significant value to the sales
In another development,
) selected Veolia Water Solutions' Actiflo technology to remove
arsenic and other metals and curb the potential of mine flooding
at its Eleonore gold deposit in the James Bay Region, Quebec. The
deal allows Veolia to be is the sole-source supplier for the
mine's water treatment system. The Eleonore project is expected
to start production by late 2014 and is expected to make a
significant contribution in 2015.
Gainers and Laggards
What Lies Ahead?
While ongoing tensions on Capitol Hill should support gold
prices this week, the yellow metal will see a momentary lack of
physical demand due to a week-long Chinese holiday. Gold bugs
will also keep an eye on a spate of U.S. economic data coming up
this week including Initial jobless claims, unemployment rate and
non-farm payroll report, which may influence the Fed's decision
on tapering as markets look forward to the next policy meeting
scheduled for later this month.
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