Gold Price Climbs, Miners Follow

GOLD PRICE NEWS – The gold price climbed $6.50 to $1,587 per ounce Monday morning, advancing on the back of a flurry of supportive macro-economic news.  Stifel Nicholas highlighted “headlines that Russian and Kazakhstan gold purchases are up, UK debt has been downgraded, Japan goes ahead with “easing” nominee” and “the US Adjusted Monetary base is up…again.”  Silver followed the price of gold higher, rising roughly 1% to $28.95 per ounce.  The U.S. dollar traded weaker against the euro, reversing some of the strong gains witnessed in 2013.

Gold mining stocks rebounded Monday after another steep drop last week, which saw the gold stocks sink 4.9%, as measured by the Market Vectors Gold Miners ETF (GDX) and 5.8%, as measured by the Market Vectors Junior Gold Miners ETF (GDXJ).  Weakness in the gold price, combined with disappointing operating performance by the gold producers, has weighed heavily on the sector’s stock prices in recent months.  The GDX and GDXJ rose 1.7% and 2.4%, respectively, in early trading Monday morning.

Hecla Mining (HL), an industry stalwart, released their fourth quarter earnings this morning.  JP Morgan noted, “Hecla delivered in-line Q4 earnings with higher-than-expected production, albeit at lower realized silver price and higher cash costs due to lower byproduct credits. It announced the reopening of its Lucky Friday mine last week, and this is expected to deliver over 2moz of silver in 2013, although costs are expected to be high as it ramps up. Its 2013 production outlook is in line with our expectations, and the company is expecting to spend 28% more towards capex in 2013. The company also reported a modest 2% increase in its proven and probable reserves and a 33% increase in its mineralized and inferred gold resources.”

Argonaut Gold (AR) announced 2013 guidance this morning of 120,000 – 140,000 ounces at cash costs of between $630 and $660 per ounce.  Scotia noted these numbers were close its analyst’s expectations of “132.3 koz at $613/oz.”  Scotia’s metals and mining team also commentated that “the company now guides to 2013 capex of $57M-$75M vs. expectations of $49M.”

The Global Precious Metals at TD Securities highlighted the surge in short positions on gold, which was revealed in the CFTC’s Commitment of Traders report. TD noted, “Gold (Futures and Options) speculative shorts jumped by 34% while silver shorts more than doubled to add 74% to the speculative position.  The gold net speculative long (futures) position is now at its lowest level since before the Global Financial crisis – June 2007 while speculative shorts (futures and options) are at their highest since April 1999 when the gold price was just $286.00 / Ounce!”

Martin Murenbeeld, Chief Economist at DundeeWealth Economics, noted that gold’s 50-day moving average broke down through its 200-day moving average – the so-called “death cross” – for the sixth time since June 2001.  Murenbeeld urged his clients to focus on Fed Chairman Bernanke’s Humphrey Hawkins Testimony (February 26-27) for clues as to the futures direction of monetary policy. Dundee’s chief economist expects Bernanke to “confirm that QE4 will not be altered much before yearend, and while he is unlikely to say why exactly it will almost certainly be because he fears that US economic data (now that the payroll taxes have been hiked and there is sequestering on March 1) will not be very positive for the first half of 2013.”

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