GOLD STOCKS NEWS – Gold stocks climbed Wednesday, with the AMEX Gold Bugs Index (HUI) rising 0.6% to 600.12 in morning trading. The rally in gold stocks was fueled by the record-setting run in gold bullion, which reached another new all-time high of $1,463 per ounce. The S&P/TSX Global Gold Index, Canada’s leading composite of gold stocks, advanced 0.2% to 411.73.
Today’s modest gains in gold stocks follows yesterday’s surge higher. The HUI, an index of large-cap gold stocks traded in the U.S., jumped 5.0% on Tuesday, its best day in over five months. Coupled with today’s rally, the gold stocks index is now higher by 4.8% in 2011. The S&P/TSX Global Gold Index, however, remains in negative territory by 2.2% year-to-date.
While most gold stocks indices have lagged the yellow metal thus far in 2011, the HUI was able to break out to a new all-time high with today’s advance. The previous record high for the AMEX Gold Bugs Index was 598.36, which occurred on December 7, 2010, with gold at $1,432.50 per ounce.
Gold stocks continue to benefit from further weakness in the U.S. dollar, as well as ongoing political and economic turmoil in the Middle East, North Africa, and Europe. Tomorrow the European Central Bank (ECB) is expected to hike its benchmark interest rate in an attempt to stem the tide of rising inflationary pressures. The prospect of higher rates in Europe has boosted the euro currency against the U.S. dollar, providing another tailwind for gold stocks.
While a rise in interest rates may appear to present a headwind for gold stocks from the perspective of raising the opportunity cost of holding these assets, one prominent investor disagreed. Eric Sprott, founder of Sprott Asset Management, stated on CNBC yesterday that rising interest rates would not alter his bullish outlook on precious metals. He noted that a sustained rise in rates would likely be the result of declining faith in fiat currencies, as investors seek out hard assets that cannot be debased by central banks. In addition, although nominal rates may be on the rise, real interest rates are likely to remain in negative territory for the foreseeable future.
Notable gold stocks posting gains on Wednesday included Agnico-Eagle Mines (AEM), Yamana Gold (AUY), and Harmony Gold (HMY). In morning trading, AEM, AUY, and HMY rallied 0.9%, 1.5%, and 2.0%, respectively. Two gold stocks in negative territory were Newmont Mining (NEM) and Randgold Resources (GOLD), which traded lower by 0.1% and 0.3%, respectively
Canaco Resources (CAN.TSXV) announced that it has agreed to purchase nine additional prospecting licenses in Tanzania, comprising approximately 1,200 square kilometers. The properties are strategically located in the Handeni region of eastern Tanzania, the locale where Canaco has discovered a new gold district. With this acquisition, Canaco’s land holdings in the Handeni region now total approximately 1,300 square kilometers. Full Canaco Press Release.
* Consideration for these properties consisted of cash and the issuance of 70,000 common shares.
* Canaco discovered the Handeni project in 2009 and since then has reported results from 125 holes.
* The company presently has five rigs drilling on the project and intends to publish an initial resource estimate by the end of 2011.
“We understand that the property acquisitions were made on the basis of the company’s proprietary geological model – where the company is looking for discrete structural windows within the preferred host rocks.”