Hedge funds’ bullish bets on gold jump to four-year high
Hedge funds and other large speculators boosted their net-long position in gold.
On a day of sharp losses on equity markets and commodity bellwethers including copper and oil hitting fresh multi-year lows, precious metals investors had a lot to smile about.
After a disappointing end to 2014 gold is beginning to build a base above $1,200 an ounce – the metal advanced 1.2% to $1,223 an ounce in late trade Friday, the highest since December 11.
Gold’s gains since hitting four-year lows early November now top 7% and is made more remarkable by the fact that the advance has come despite a rampant dollar which hit a 12-year high against major currencies yesterday and a Friday jobs report that confirmed that the US economic recovery remains on track.
Top gold producer Barrick Gold Corp (NYSE:ABX, TSE:ABX) added 3.6% in market value in strong volumes of just 18.5 million shares in morning trade on the NYSE, but pulled back later in the day to end 1.7% higher at $10.99 a share.
Not a bad performance considering the harsh assessment on the company’s prospects made by Macquarie Capital Markets in a research note issued on Thursday. Analyst Ron Stewart warned of another $2.5 billion in writedowns, a declining production profile and problems at board level and summed up Barrick’s challenges this way via Financial Post:
“Miners are known for their ability to dig holes; big miners dig big ones. Barrick, the biggest gold miner on the planet, however has dug itself into a huge financial hole that is going to be difficult to get out of any time soon unless metal prices improve.”
The world’s number one producer of the metal, expected to produce roughly 6 – 6.5 million ounces in 2014, is down 41% over the last six months with a market value of $12.7 billion in New York. That compares to $64 billion capitalization when gold was at $1,900 in 2011.
World number two Newmont Mining Corp (NYSE:NEM) had a better day, climbing 3.7%, which lifted the Denver-based company’s valuation back above $10 billion. Newmont is having a good 2015 so far, with almost double digit gains.
Talks last year between Newmont and Barrick about a possible merger ended acrimoniously with both sides going public with unflattering comments about incompatible corporate cultures, but the rumours have never really gone away.
Goldcorp (TSE:G, NYSE:GG) surged 5.3% 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 $16.2 billion in New York is forecasting production of 2.95 – 3.1 million ounces this year.
Contrary to Barrick, which has two giant projects in Zambia and Chile-Argentina that is going nowhere, Goldcorp is still adding to its ounces – its latest project to come on stream is the Argentina-based Cerro Negro gold and silver mine. The high-grade operation boasts reserves of 5.7m ounces.
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 a year ago over $4 billion, were some of the strongest performers on the day, adding 5.8% and 6.2% respectively.
Toronto-based Yamana is worth $4.7 billion and Agnico $6.1 billion making the acquirers the globe’s seventh and 10th most valuable listed gold miners. Agnico started 2015 with a bang – the stock is up 19.7% year to date. The Toronto-based company operates nine mines located in Canada, Finland and Mexico. Yamana is up 13%, but has a lot of ground to make up to recoup last year’s losses.
Punters’ favourite Randgold Resources ADR’s trading on the Nasdaq (LON:RSS, NASDAQ:GOLD), jumped 4.6% on the day. The Africa-focused miner with a $6.9 billion valuation is one of the counters that is higher that a year ago although well below a more than four-year high reached in July.
Big things are expected of Randgold’s Kibali mine in the Democratic Republic of Congo and the company has a number of projects in the pipeline.
Toronto’s Kinross Gold (TSX:K) worth $4.7 billion was one the best performer on the day with a 7% surge. The stock is up nearly 25% in 2015, despite worries about the impact on the company’s operating mines in Russia. The company produced 2.6 million ounces last year with some 720,000 ounces coming from Russia.
Canada’s Eldorado Gold Corp (TSX:ELD) also gained, adding 4%. The fast-growing miner worth $5.7 billion in Toronto is up 12% since the start of the year 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 worht $8.6 billion on the NYSE, soared by just under 6% continuing gains since releasing strong third quarter results and boosted its production outlook to the top end of previous guidance.
AngloGold Ashanti is expected to have produced 4.35m – to 4.45m ounces in 2014 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 6.5%. The Johannesburg-based company, targeting 2 million ounces a year, is up 22% in 2015.
Fellow South African miner Harmony Gold (NYSE:HMY) was the top share on the day – the company’s ADRs soared 9.8% building on gains of 36.5% this year thanks to a positive pre-feasibility study of its 20 million ounce Wafi-Golpu project in Papua New Guinea.
