GOLD PRICE NEWS – The gold price bounced back above $1,600 on Friday, rallying $11.17 to$1,602.13 alongside the price of silver. While the price of gold advanced, gold’s sister precious metal climbed $0.52 to $39.85 per ounce, despite modest strength in the U.S. dollar. The euro currency fell 0.4% to 1.4371 this morning, following yesterday’s surge from 1.41 to 1.44 on the heels of the European summit on Greece.
On Thursday the gold price fell $11.18 to $1,589.53 per ounce as policymakers in Europe announced sweeping measures in the hopes of combating the sovereign debt crisis. The price of gold initially held near $1,600 per ounce yesterday, but turned sharply lower in mid-day trading. The gold price reached an intra-day low of $1,585 before paring a small portion of its losses into the close.
Silver dropped alongside the gold price, by $0.91, or 2.3%, to $39.22 per ounce. Gold’s sister precious metal stabilized in morning trading near $40, but tumbled briefly below $39 before also regaining a modest share of its losses. With the sell-off in precious metals, the price of gold and silver cut their respective monthly gains to 6.0% and 13.0%.
Weakness in the gold price pressured gold equities, as the AMEX Gold Bugs Index (HUI) slipped 0.4% to 571.62. In doing so, the HUI reduced its month-to-date gain to 9.6% and cut extended its year-to-date loss to 0.3%. Notable decliners included Goldcorp (GG), IAMGOLD (IAG), and Royal Gold (RGLD) – with losses of 2.0%, 0.7%, and 0.2%, respectively.
While the gold price and shares of gold mining companies posted losses, the broader equity markets climbed on the heels of the news in Europe and the U.S. The Dow Jones Industrial Average (DJIA) rallied 152.5 points, or 1.2%, to 12,724.41, its highest level since May 10. Oil prices briefly surpassed $100 per barrel for the first time in five weeks. The euro currency surged nearly 200 basis points, or 1.4%, to 1.4410 against the U.S. dollar.
The catalyst for the gold price sell-off and broad-based rally was the European summit held in Brussels, Belgium on Thursday. There, euro zone officials agreed to a plan that would allow the European Financial Stability Facility (EFSF) to purchase bonds of troubled nations in the secondary market, while extending the maturity of loans and lowering interest rates. Such measures would lower the debt burdens of the PIIGS and hope to calm European markets, which have been under severe pressure in recent months.
At the summit, policymakers also agreed to a new round of bailouts for Greece, totaling €109 billion. France’s Nicolas Sarkozy, Germany’s Angela Merkel, and other top officials also agreed to extend the maturity of future loans for Greece to a maximum of 30 years (from the current 7.5 years). In an official statement, the euro zone pledged that member nations would work closely to develop concrete proposals by October “to improve working methods and enhance crisis management in the euro area.”
While markets cheered the European news on Thursday, there are many details that still need to be worked out. Furthermore, given the various circumstances facing each member of the PIIGS and the fact that many of these measures have not previously been implemented, significant uncertainty remains.
Furthermore, as Reuters noted in a report yesterday, the European summit “is very unlikely to mark a complete resolution of the crisis, as Merkel herself acknowledged earlier this week…A second bailout may simply keep Greece afloat for a number of months before a tougher decision has to be made on writing off more of its debt.”
Lastly, these measures do not address the fundamental and structural problems of excessive debt levels throughout the European financial system. Instead, they involve further currency debasement as officials continue to kick the can down the road rather than allowing for debt defaults. Coupled with the likelihood of further tough decisions on Greece in the months ahead, the unstable economic environment is likely to continue to provide a favorable backdrop for the gold price, notwithstanding short-term declines as witnessed on Thursday.
Klondex Mines Reprices Warrants
* The warrants, if exercised within 18 months of issuance, would also earn an equal number of new warrants exercisable until April 5, 2016 at the higher of 115% of the 5-day volume weighted average price at the time of the issuance, or C$5.00, whichever is greater.
* Pursuant to an agreement reached on June 15, 2011, Klondex has agreed to amend the terms of the warrants to reduce the exercise price to C$2.76 per common share (the five-day volume weighted average price on that date) as consideration for the Lender agreeing to waive any default under the loan agreement as a result of certain National Instrument 43-101 compliance issues related to the Company’s March 30, 2009 technical report.
* An updated technical report, which incorporates results from Klondex’s 2009 and 2010 drill programs, is currently being prepared.
