Massive buying of gold stocks as fear trade returns
On Wednesday, the price of gold spiked higher after a second day of renminbi-inspired turmoil on world markets sparked a return to safe-haven buying.
Futures contracts in New York with December delivery dates were trading at $1,123.70 an ounce after hours, up 1.5% from yesterday's close and its best level since the July 20 drop.
While talk of a new round of currency wars burnished gold's reputation as a storer of wealth short covering on the futures market also boosted the metal. Large gold futures investors like hedge funds have held net short positions for three weeks in a row – bearish positioning not seen since data was first collected in 2006.
Any sustained move higher could see a scramble for gold on the futures market with some analysts estimating that short covering alone could take gold $50 higher from today's level.
Higher gold led to massive buying of the world's top gold mining stocks.
Barrick Gold Corp (NYSE:ABX, TSE:ABX), the world's top producer of the metal, added 5.9% with more 36.m shares changing hands, 14m more than already high volumes traded since the company released its second quarter results last week.
Despite announcing a 60% dividend cut Barrick's market value is up over 24% since releasing its financial report and is now worth $9 billion in New York, but the counter is still trading 56% below the same time last year.
Barrick's gold production is expected to fall to between 6.1m – 6.4m ounces this year as the Toronto-based company continues to sell off assets. Barrick also announced last week that it has completed scenario planning to withstand a $900 an ounce gold price.
The world's most valuable gold stock, Goldcorp (TSE:G, NYSE:GG) advanced 5.3% in heavy volumes of more than 15m shares traded and is now worth $12.1 billion in New York and C$16.6 billion in Toronto. The year-to-date decline for the Vancouver-based firm is a relatively modest 8% in Canadian dollar terms thanks to the falling loonie which hit 11-year lows this week. After a record second quarter Goldcorp is forecasting a whopping 20% production increase this year at the high end of its forecast range of between 3.3m – 3.6m ounces.
World number two in terms of production Newmont Mining Corp (NYSE:NEM) surged 6.5%. Denver-based Newmont, the only gold company that forms part of the S&P500 index and which has been publicly traded since 1940, is having a good 2015 so far, with only 4% decline this year. While others are disposing of mines, Newmont is building its portfolio and in June acquired the Cripple Creek & Victor gold mine in Colorado for $820 million in cash from AngloGold Ashanti.
American Depository Receipts of AngloGold Ashanti (NYSE:AU), the world's third largest gold producer in terms of output, surged 8.6% for a market value of $2.5 billion on the NYSE. AngloGold Ashanti is expected to produce some 4m ounces in 2015, but is in the midst of tough wage negotiations at its core operations in South Africa and the threat of a strike has seen the counter lose 37% since May.
ADRs of fellow South African miner Gold Fields (NYSE:GFI) soared 9.4% while peer Sibanye Gold (NYSE:SBGL) appreciated 6.5%. Gold Fields and Sibanye are the seventh and ninth largest gold miners worldwide in terms of ounces, but rank further down the field in terms of market value. Gold Fields is worth $2.1 billion in New York while investors lifted Sibanye to just over $1 billion in market value today.
Agnico Eagle Mines (TSE:AEM, NYSE:AEM) was a one of the day's top performers leaping 9% and swelling its market capitalization to $7.3 billion in Toronto and $5.2 billion in New York.
The stock is the only major gold producer in positive territory for the year – up 4% on the NYSE and a healthy 16% increase in Toronto as it makes the most of currency depreciation at its nine mines located in Canada, Finland and Mexico. Agnico's Meadowbank mine in Canada and 50%-owned Canadian Malartic mine are ramping up production helping it to raise 2015 output guidance to 1.6 million ounces.
Randgold Resources ADR's trading on the Nasdaq (LON:RSS, NASDAQ:GOLD) also caught fire trading 4.8% higher. The Africa-focused miner with a $5.7 billion valuation has kept market losses to only 3% this year. Randgold has been piling on the ounces at its mines in West and Central Africa, and in its most recent quarter topped 300,000 ounces for the first time, up 7% from 2014.
Australia's Newcrest Mining Limited (ASX:NCM) joined the party when the Sydney exchanged opened on Thursday, jumping 4.6% for a A$8.9 billion market cap. Sixth in the output ratings Newcrest produced 2.4 million ounces in its financial year to end June. Newcrest mines copper and gold in Australia, Indonesia, Africa and Papua New Guinea and is a joint owner with South Africa's Harmony Gold of the giant Wafi-Golpu project in PNG.
Toronto's Kinross Gold (TSE:K) did not have such a good day as its peers moving up a relatively modest 1.8% bringing its market worth to $3.2 billion, but the counter has enjoyed something of a rerating recently. The stock is up 24% over a week's worth of trading .
While gold production fell to 661,000 ounces during the second quarter, but the company said it's on track to end 2015 at the higher end of its guidance for the year of 2.4 – 2.6 million ounces.
Image of Meadowbank mine by Jason Pineau