Gold Gains on Inflationary Slowdown in US; Gold Miners' Results Point to Rising Costs, Energy Problems
Gold Prices added to an overnight bounce at the New York opening on Thursday, rising sharply to reach above $925 per ounce on news of sharply higher US inflation and a slowing economy.
Gold had earlier recorded an AM Fix here in London of $912 per ounce – more than 2.1% above yesterday's five-week low – as crude oil slipped and the US Dollar held steady on the forex market ahead of today's data.
The US currency then dropped almost a cent vs. both the Euro and Sterling on news that the US price deflator – a
measure of cost-price inflation – jumped from 3.6% to 4.2%
year-on-year during the second quarter.
Overall, economic growth on the official measure slowed to 1.9% from
2.0% annualized. Last week's unemployment figures, released this
morning, also weighed on the Dollar by showing a sharp rise in both
continuing and new claims.
Western stocks markets reversed an early rise on the US data, pulling the FTSE100 in London and New York's S&P500 towards a slight loss for the month.
The Morning Gold Fix in London, in contrast, averaged a 6% gain from June at $941.53 per ounce, its second-highest monthly price ever.
"There's a very real chance Gold could trade above $1,000 an ounce by year-end," said Mark Bristow, CEO of African gold miner Randgold Resources in a phone interview with Thomson-Reuters today.
Reporting a 196% jump in second-quarter profits from the disastrous Q2 of 2007, Bristow said that a new record-high in the Gold Price would then look likely.
Also reporting results today, Barrick Mining – the world's largest gold miner – said its net income rose by one-fifth in Q2 from the same period last year. That gain was tempered by cash costs per ounce rising 24% to $417.
AngloGold Ashanti – the world's third-largest gold miner – announced a smaller loss for the second quarter, along with a dividend of 50¢ per share. It mined 1.25 million ounces of gold between April and June, attributing the growth to better power supplies in South Africa. But it also bought back some 2.71 million ounces previously sold forward on its Gold Hedge Book.
Total cash costs rose by 30% from the second-quarter of last year to reach $434 an ounce.
Anglogold's Navachab Mine in Namibia now faces "an imminent blackout" says the local Informanté news site today, thanks to national power cuts threatened by a failed generating unit at the Koeberg Nuclear Station in neighboring South Africa.
"What you have to take a view on when you buy [gold mining] equities is management, operational and political risk," as Randgold chief Bristow said to MiningWeekly this spring.
"Equity's got a lot more leverage, but it is perhaps riskier."
Global gold-mining output slipped 5% in the first quarter of 2008 according to the latest data from GFMS, the London consultancy, on behalf of the World Gold Council (WGC).
Today in Hong Kong, the WGC launched the highly popular SPDR exchange-traded gold fund (Gold ETF) onto the local HKEx stock market.
"We have witnessed a significant increase in demand for Gold from Hong Kong investors," said CEO James Burton, "with demand for gold at the retail level more than doubling in 2007."
Meantime in Hanoi, Vietnam today, a raft of results from local Gold Dealers also showed strong growth. The Phu Nhuan Jewelry Co. saw turnover rise by 40% during the first-half of 2008.
Commercial bank Viet A attributed 45% of its total profit to Gold Trading according to the DTCK newswire.
Western banking groups, in contrast, continued to report poor second-quarter results today, with Germany's Deutsche Bank announcing a fall of 64% in net profits from this time last year, led by a write-down in asset values worth €2.3 billion ($3.5bn).
"The second quarter of 2008 proved to be another very challenging quarter for the banking industry," said Josef Ackermann, Deutsche's CEO.
Last October, he forecast "substantial opportunities in investment banking after [summer 2007's] period of correction." (Remember when Subprime Was Like, So Over...?)
Back on the economic front, the UK's second-largest mortgage lender, Nationwide, reported a record drop in average house prices, down 1.5% over the last month alone.
The Eurozone's latest Consumer Price Index said annual inflation held at a 16-year high of 4.1% this month. Unemployment in the 15-member currency zone rose to 7.3%.
Friday brings Average US Earnings data plus the latest US unemployment statistics.
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