Hedge funds’ bullish bets on gold jump to four-year high
Hedge funds and other large speculators boosted their net-long position in gold.
After flirting with $1,200 an ounce during the past three sessions the price of gold settled above the psychologically important level on Tuesday, the metal’s highest close since October 29.
Gold’s gains since hitting four-year lows early November now top 5% and is made more remarkable by the fact that the advance has come despite a rampant dollar and the spectre of higher interest rates in the US.
Investors, convinced that gold has now built a solid base, piled into gold stocks en masse with most of the gains coming towards the end of trading on Tuesday.
Gains were across the board, led by the heavyweights in the sector.
Top gold producer Barrick Gold Corp (NYSE:ABX, TSE:ABX) added 4.3% in market value in massive volumes of more than 8 million shares, compared to a daily average of 2.7 million shares.
The world’s number one producer of the metal, expected to produce roughly 6 – 6.5 million ounces in 2014, is still down more than 20% in 2014 with a market value of $17.1 billion on the Toronto stock exchange.
The company recently said it is confident its stalled Pascua Lama gold and silver project in South America will get built and put a new executive in charge of the project. The Canadian miner has already spent $5 billion on the project, which could have a final bill in excess of $8.5 billion after a series of cost overruns.
World number two Newmont Mining Corp (NYSE:NEM) could not match the Canadian miners’ performance on the day and gains were curbed at 2.8%, but the Denver-based company was the volume leader with a whopping 17.1 million shares changing hands.
Talks earlier this year between Newmont, worth $9.7 billion on the NYSE, and Barrick about a possible merger ended acrimoniously with both sides going public with unflattering comments about incompatible corporate cultures.
Newmont shares have outperformed Barrick this year with year to date losses capped at 14%.
Goldcorp (TSE:G) gained 4.86% on the day as it continues to recover from multi-year lows struck at the end of October.
The Vancouver-based company, the world’s most valuable gold stock, with market capitalization of $19.3 billion is forecasting production of 2.95 – 3.1 million ounces this year.
Goldcorp is still adding to its ounces with its latest project to come on stream is the Argentina-based Cerro Negro gold and silver mine.
The high-grade operation, which produced its first gold dore bar last July, is expected to churn out between 130,000 and 180,000 ounces of gold this year.
Yamana Gold (TSE:YRI) and Agnico Eagle Mines (TSE:AEM), responsible for the biggest gold sector acquisition in some time when it bought Osisko’s Malartic mine in Quebec earlier this year for over $4 billion, gained 5.6% and 3% respectively.
Toronto-based Yamana is worth $4.1 billion and Agnico $5.5 billion making the acquirers the globe’s sixth and ninth most valuable listed gold miners. After starting the year with a bang Yamana shares are down 47% year to date.
Agnico has managed to stay in positive territory year to date. The Toronto-based company operates nine mines located in Canada, Finland and Mexico.
Punters’ favourite Randgold Resources ADR’s trading on the Nasdaq (LON:RSS, NASDAQ:GOLD), jumped 2.5% on the day. After a brutal sell-off investors have now chased the stock 20% higher over the last three weeks affording the Africa-focused miner a $6.5 billion valuation.
After rising to a more than four-year high in July, Randgold was punished following a massive output miss at its new Kibali mine in the Democratic Republic of Congo (DRC).
The company nevertheless managed to up quarterly production to just under 300,000 ounces, 28% more than in the same year-earlier period, and has a number of projects in the pipeline.
Toronto’s Kinross Gold (TSX:K) worth $4 billion was the best performer on the day with a 11.1% surge. A stunning 8.6 million shares were traded, almost triple the usual number. The stock is still down 24% in 2014 over worries about the impact on the company’s operating mines in Russia amid the tensions over Ukraine.
Canada’s Eldorado Gold Corp (TSX:ELD) also soared, adding 10.7% with 7.7 million shares bought and sold, more than twice usual volumes. The fast-growing miner worth $5.4 billion in Toronto is up a stunning 40% since November 5, as takeover rumours continue to swirl and the counter is rerated.
Eldorado is starting up a mine in Romania and also operates in China, Turkey and Greece with a target of 1.4 million ounces this year.
AngloGold Ashanti (NYSE:AU), the world’s third largest gold producer, climbed 4.3% continuing gains since releasing strong third quarter results and bullish guidance.
The Johannesburg-based firm announced lower than expected costs and boosted its production outlook to the top end of previous guidance.
AngloGold Ashanti revised its full year 2014 output outlook to 4.35m – to 4.45m ounces despite the sale of the Navachab mine in Namibia in May, losses caused by the earthquake in South Africa, and the transition of the Obuasi Mine to limited operating state by year-end.
South African miner Gold Fields (NYSE:GFI) jumped 4.4%. The Johannesburg-based company, targeting 2 million ounces this year, is up 41.6% in 2014 after a dismal performance last year when in a contrarian move it picked up some of Barrick’s Australian operations.
