Gold
By Kishori Krishnan Exclusive To
Gold Investing News

TSX, the main Canadian stock index closed at its highest level in seven months on Thursday, with energy and mining stocks all moving higher in a TSX trifecta that followed encouraging economic reports from the United States.

The S&P/TSX financial group rose 2.6 per cent, the energy index added 3.6 per cent, and the global gold sector punched higher by four per cent, after April durable goods orders in the U.S. rose the most in 16 months, sales and prices of new homes both went up in April, and the number of new unemployment claims fell for the second week in a row.

The August gold contract climbed $8, or 0.8 per cent, to US$ 963.20, helping push the Canadian dollar up two-thirds of a cent.

On the TSX,  Gammon Gold (NYSE: GRS) had one of the best days amongst gold stocks, rising 55 cents, or six per cent, to $9.25. Vancouver-based First Quantum Minerals (TSX: FM) rose 20 cents, or 0.4 per cent, to $47.20. The African copper miner is sitting on $600 million, the remaining proceeds of a recent issue of $500 million in convertible bonds as well as a $280-million common stock offering.

Gold price surges

In London, gold hit a three-month high on Friday, of $966.80 an ounce as the dollar fell towards a five-month low versus a basket of currencies, with worries over soaring government debt prompting investors to sell the safe-haven currency. Spot gold was bid at $966.40 an ounce against $958.80 an ounce late in New York on Thursday. 

Oil prices climbed past US$65 per barrel, scaling new six-month highs after the United States reported a sharper-than-expected drop in crude inventories. Prices also rallied as the US currency dropped against the euro, making dollar-priced oil cheaper for holders of other currencies, and after OPEC said it was maintaining output at current levels. New York’s main futures contract, light sweet crude for delivery in July, jumped as high as US$65.35 per barrel, and closed US$1.63 higher at US$65.08, its highest close since November 4. 

At the Comex exchange, gold for June delivery gained US$ 7.50 to US$960.80 an ounce. July silver ended 27.5 cents higher at US$15.14 an ounce, while July copper futures added 1.6 cents to US$2.137 a pound.

On Friday, European and Asian equities climbed. The MSCI World Index is set for a third consecutive monthly increase, the first such gain since the credit crisis began in August 2007, as investors speculated the $12.8 trillion pledged by the U.S. government and the Federal Reserve would end the first global recession since World War II.

Silver “is very correlated to gold, but silver does have industrial application that gold doesn’t,” Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, told Bloomberg. “The ‘green shoots’ story is more positive for silver. It’s a very small market compared to gold. Even small amounts of money coming in can move up the price a lot.”

An ounce of gold now buys about 63 ounces of silver, the lowest ratio since September, according to data compiled by Bloomberg. That compares with 84 in October, the highest level since March 1995.

“This trend is likely to persist as we head into the summer months and more ‘green shoots’ offer additional support to silver’s appeal as an industrial metal as well,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote in a note.

Gold shines

In India, despite the World Gold Council (WGC) not hyping up Pushya Nakshatra, the two-day auspicious period to own gold, the yellow metal sales rose 50 per cent across the country. According to an estimate, the daily average normal gold sales in May was around 500 kgs, which rose to 750 kgs on Thursday due to the celebration of the festival which is considered good for buying gold and is celebrated in Gujarat and south Indian states.

Sales have risen 40-50 per cent, confirmed Bhargav Vaidya, an analyst with B N Vaidya & Associates, a Mumbai-based precious metals trading firm. However, consumers are awaiting a correction of Rs 200-250 per kg. If price cools a bit, consumer interest will resume for gold as a safe haven.

Presently, gold consumers are hesitant to pump fresh money into this asset class, said Ketan Shroff of Pushpak Bullions, a Mumbai-based precious metals trading firm. Shroff, however, confirmed that the consumers’ interest rose on Thursday. But, the average sales being very low, the overall impact was minimal, Shroff added.

Company news

Claymore Investments has announced that Claymore Gold Bullion Trust has substantially invested the net proceeds of its initial public offering and has purchased 345,000 ounces of gold at a weighted average price of US$ 959.05 per ounce on a fully-hedged basis.

The trust has retained a nominal amount of cash for further gold bullion purchases and working capital purposes. The net asset value of the trust as at the end of business on May 28, was $9.4123, which value is based on the London PM Fix Gold price of US$ 957.75 per ounce.

GLR Resources Inc. (GRS:TO) has announced a deal to sell the company’s Goldfields Mine Project in northern Saskatchewan to Linear Gold Corp. GLR is one of the Kasner group of companies and has its head office in Kirkland Lake. Once the company has received court approval for the transaction and settlement of obligations GLR will receive US$ 5-million in cash and 727,272 common shares of Linear, with a deemed value of C$ 800,000.

As well upon delivery of certain previously contracted plant and equipment Linear will reimburse GLR for deposits made to suppliers. This amounts to US$ 3 million and C$1.2 million.