GOLD PRICE NEWS – The gold price held firm as the People’s Bank of China ramped up its fight against budding inflation pressures. The price of gold traded near unchanged at $1,384.25 per ounce after news that the PBOC raised banks’ reserve ratios 50 basis points, effective February 24. If the gold price is able to close in positive territory today, it will have risen every day this week.
Gold prices have held firm despite the fact that Chinese policymakers have undertaken a series of measures – including interest rate hikes – in order to cool its economy and contain inflation. Food inflation has been a primary concern as the working class in the developing world devotes an outsized portion of their incomes to purchase food. While emerging nations step up their fight against inflation, Fed Chairman Bernanke shows little signs of deviating from his zero interest rate and quantitative easing policies – a fact that has helped buoy not only the gold price, but nearly all asset classes.
Precious metals have been strong as the U.S. Fed continues its commitment to keep easy monetary policy in place despite soaring commodity prices. Silver has gained 13% this month, gaining at a multiple of the gold price, which has appreciated 4% in February. At $31.71 per ounce, silver is trading at its highest level since 1980 when the Hunt Brothers attempt to corner the market sent the price to $50 per ounce.
Silver stocks have benefitted, evidenced by yesterday’s strong performances. Coeur d’Alene Mines (CDE), Pan American Silver (PAAS), and Silver Wheaton (SLW) rallied 4.1%, 1.3%, and 2.3%, respectively. Gold equities posted gains as well with the AMEX Gold Bugs Index (HUI) rising 1.0% to 549.05. With yesterday’s advance, the HUI extended its month-to-date return to 8.5%. Notable advancers included HUI component Newmont Mining (NEM), which gained of 1.7%.
Large-cap gold companies are in the midst of earnings season from a quarter that saw gold prices reach new all-time highs. Barrick Gold (ABX), the world’s largest gold miner, rallied 1.9% to $50.64 after fourth quarter earnings of $0.95 beat analysts’ estimates of $0.86 per share. Jamie Sokalsky, CFO of Barrick Gold, stated that “We’re not inclined to view the gold price as being anywhere near the top.”
AngloGold Ashanti (AU), the largest African-based gold producer, advanced 2.3% to $47.30 per share after reporting adjusted quarterly earnings of $294 million. The company reported gold production of 1.148 million ounces at total cash costs of $672 per ounce, ahead of previously-issued guidance.
The gold price has now recovered more than half of the $118.72 slide it endured from its $1,432.50 all-time high on December 7, 2010 to its $1,313.78 multi-month low on January 27. Furthermore, the price of gold is on pace for its third consecutive weekly gain and looks poised to reclaim the $1,400 level in short order.