Last week saw gold trade in a narrow range before lurching lower on Thursday and Friday, as better than expected US GDP and employment data increased the likelihood of the Federal Reserve cutting back its monetary stimulus programme. Gold ended the week down by 2.0% at $1,288 per ounce, after investors interpreted both reports as increasing the chance that the Federal Reserve will start to taper its bond-buying programme sooner rather than later, cutting the flow of cheap money to the market and reducing demand for gold as an anti-inflation hedge.
Of course, the only practical way for most private investors to invest in gold is through exchange-traded funds. The largest gold ETF, the $38bn SPDR Gold Trust (NYSEMKT: GLD.US), ended last week down by 2.2% at $124.28, while London-listed Gold Bullion Securities (LSE: GBS) ended the week down 2.2% at $123.69. So far this year, shareholders of Gold Bullion Securities have seen the value of their holdings fall by 23.2%, while the value of SPDR Gold Trust shares has fallen by 23.8%.
Last week’s falling gold price was reflected in the share price of most gold miners, but three UK-listed companies managed to make big gains, thanks to company-specific developments:
Highland Gold Mining (LSE: HGM) ended the week up by 9.4% at 70.5p. The move was slightly puzzling, as the £236m Russian gold miner has not released any news to investors since its half-yearly report in September.
Randgold Resources (LSE: RRS) also rose, ending the week up by 4.3% at 4,735p, after unveiling impressive third-quarter results which showed that the FTSE 100 gold miner delivered an 80% increase in profit compared to the previous quarter, thanks to increased production from its Loulo-Gounkoto complex in Mali. Randgold’s total production rose by 19%, as the firm’s Kibali mine started to ramp up production, while the firm’s total cash cost per ounce fell by 17% to $662 — far lower than most of its peers.
Africa Barrick Gold (LSE: ABG) climbed 4.8% to 199p, as investors continued to buy into the FTSE 250 miner, following its third-quarter results on 30 October, which showed that the firm’s restructuring and cost-cutting should allow it to mine profitably at much lower gold prices than previously.
