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Gold rises as ECB cuts interest rates; gold producers get a boost

Published: 14:49 02 May 2013 EDT

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Gold settled higher on the Comex today with the most active contract, June, finishing up US$21.40 per ounce to US$1,467.60, a bump that is consistent across the board as every market from May 2013 to April 2014 spikedapproximately US$20.

The rise comes on the back of the European Central Bank cutting its interest rate for the first time in almost a year, such cuts having the knock-on effect of motivating investors to put their money in assets like physical gold over interest-bearing accounts.

Following the rate decision, gold rose on the London Metals Exchange to hit a session high of $1,473.40 an ounce.

The yellow metal has now gained back more than half the ground lost during its record-setting market humbling mid-April, which saw a close at US$1,564 per ounce on April 11 turn into a loss of more than $200 per ounce over the next two days’ trading to hit as low as US$1,320, the metal’s largest two-day fall in decades. 

Gold producers on the TSX did well from the day’s rally, with pack leader Yamana Gold Inc (TSE:YRI) up by more than 40 cents a share to hit $12.06 a rise of almost 3.5 per cent. 

Centerra Gold Inc. (TSE:CG) also did well, rising 13 cents per share to hit $4.09 a rise of almost 3.3 per cent, and Detour Gold Corp. (TSE:DGC) added 32 cents to its share price to hit $11.76, a bump of almost 3 per cent.

Other gold producers doing well out of the upswing included McEwen Mining (TSE:MUX), which added 6 cents per share to hit $2.2, a rise of almost 2.7 per cent and SEMAFO (TSE:SMF), which went up by a nickel to hit $1.93 per share for a rise of more than 2.5 per cent.

Troubled giant Barrick Gold Corp (TSE:ABX) was also up on the back of the rally, adding 40 cents to its stock to hit $19.75 per share, while Kinross (TSE:K) was also higher, adding 6 cents per share to its price to hit $5.46  - a rise of more than one per cent.

The rally comes on the same day Goldcorp (TSE:G) (NYSE:GG) posted a drop of more than 35 per cent in its first quarter net profit, with net earnings of $309 million compared to $479 million the same quarter a year earlier, citing lower gold prices and higher costs. The Canadian gold miner reported all-in sustaining costs of $1,135 per ounce, although president and CEO, Chuck Jeannes said he expects an increase in gold production to result in a corresponding decrease in operating costs.

Jeannes also said, in a company statement released with the figures, “A contingency plan is now in place that would defer spending should market conditions warrant; however, Goldcorp [is] positioned for success in any conceivable metals price environment," an acknowledgement of the changed environment in which the company is operating.

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