Gold News

Spot Gold Recovers $1300, London Fix "Seeks External Admin" as Investors "Split" Over Gold Miner Hedging, Barrick Loses CEO

SPOT GOLD recovered the $1300 per ounce level Wednesday afternoon in London, rallying 0.8% from this week's earlier $50 plunge as world stock markets also rose with the Dollar.
 
Bullion banks leading the world's wholesale market in London meantime invited external proposals for administering the century-old daily Gold Fix.
 
The news follows last week's announcement of a new daily London Silver Price process, set to replace the 117-year old Silver Fix amid regulatory, investor and media scrutiny of the precious metals benchmarks.
 
Spot gold prices "[found] support on approach of the 100-day moving average," says a note from South Africa's Standard Bank, pointing to Tuesday's low of $1292.
 
But "with open interest this high" in Comex gold futures and options contracts, "we expect it more difficult to find the marginal buyer for the metal," they add.
 
Silver prices today failed to track gold higher, stalling below $20.80 per ounce in a tight trading range.
 
"With macro-economic and geopolitical developments offering limited support," agrees London-based consultancy Metals Focus, "a large-scale return of mainstream investors to gold appears unlikely in the near term.
 
"Without a significant 'bid' from institutional players, any upside for prices will be limited."
 
Tuesday saw another jump in the number of Put options on August and Sept. gold futures, according to Thomson Reuters data, which offer the holder a profit if prices fall.
 
"For the time being," say analysts at market-maker Barclays, "we are allowing for further range trading over the coming 3-6 months as gold is caught between the prospect of higher US yields, inflationary expectations, and geopolitical rumbles."
 
Over on the currency markets, the Euro touched a 1-month low near its lowest since February after new data showed US factory-gate inflation beating analyst forecasts in June, with prices up 0.4% from May.
 
The British Pound briefly spiked to new 6-year highs after UK unemployment showed a drop to 6.5% in June.
 
UK wage growth badly lagged consumer-price inflation, however.
 
Spot gold priced in British Pounds recovered to £760 per ounce, some 2.8% below last Friday's 15-week closing high.
 
Barrick Gold – the world's largest single gold miner – meantime said its CEO Jamie Sokalsky will step down in September.
 
Building a gold price "hedge book" equaling well over 600 tonnes of future production by the time spot gold bottomed in 2001, Barrick (NYSE:ABX) then quit those hedges early as prices rose, buying back the last 90 tonnes at what were then record-high prices in 2009.
 
Barrick chairman John Thornton – who does not plan to replace Sokalsky near-term – said on taking the role last year that he " always thought it made great sense to hedge."
 
"The pendulum has swung and the view is evenly split," says a survey of investor attitudes to gold miner hedging released today by US bank and London bullion market-maker J.P.Morgan.
 
Having found 70% of clients against gold miner hedging in 2011, J.P.Morgan says the split is now "50% for and 50% against."
 
Barrick's shares rose 2.4% in New York on Wednesday, trading almost 50% below the level of late 2009 when it closed its hedge book.

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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