Gold News

Gold prices hold onto 1.2% jump; mining costs rise as output slips

Spot gold prices held steady in thin Asian trade after rising 1.2% to $682.50 per ounce late in Thursday's New York session.

"I believe the positive gold trend remains intact," said Darren Heathcote of Investec Australia earlier today.

"It's clear the plethora of Asian holidays this past week, coupled with reported physical selling in London, has suppressed prices.

"However the physical selling now looks to be on the wane, and despite a stronger Dollar versus the Euro, gold has regained much of the lost ground." (Why might the Euro pull back further on the forex market? Read more here...)

The gold price in Sterling also leapt higher from a one-month low late on Thursday, adding 1.3% to Friday's London opening at £343.50.

For European investors, the Euro gold price slipped just €1 from yesterday's nine-day high, beginning the day in London at €502.50 per ounce.

Gold rose "more on technical buying than anything else," said Charles Nedoss at Peak Trading in Chicago to MarketWatch overnight.

"I'd see more buying emerge here if we take out $690. It could be a very quick trip to the highs from there."

Today's note from Standard Bank agrees that Thursday's strong gold buying means "the corrective phase that saw gold fall to $668 may have run its course.

"For the bull-run to resume, the immediate challenge for gold is to take out resistance at $683, followed by fighting through traffic at the $692/$695 band where it failed repeatedly in the latter half of April."

Having fallen just one week in the last eight, however, "the recent clean-out was a little lighter then initially expected," says Brandon Lloyd for Mitsui in Sydney.

"In previous cases where the consolidation has been this tight, gold has tended to trade higher quickly." (Get the 'big picture' of gold's six-year bull market here...)

In the gold mining sector meantime, talks will continue today between the government of Peru and local miners unions, who went on strike Monday.

Peru is the world's largest producer of silver and the fifth-largest gold producer. The current strike could "seriously disrupt supplies" according to one analyst.

This morning AngloGold Ashanti, the world's third biggest gold mining company, reported first quarter production down 1% from Q1 last year and 10% down from Sept. to Dec.

The news comes after Gold Fields, the world's fourth largest gold producer, reported first quarter output down 3% from the same period last year.

AngloGold's declining production came despite a 25% hike in capital expenditure. Gold Fields' cash costs per ounce rose by 16%.

"I hope [costs] would not get worse than this," said Gold Fields' CEO Ian Cockerill on South African radio last night, "but I definitely do not see a short-term relief."

To learn more about the pressures facing global gold mining production in 2007, click here now...

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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