After touching a high of $1,221 per ounce on Thursday, gold has retreated back to recent lows and was trading at $1,207 per ounce on Friday morning, ahead of US markets opening. Markets are increasingly price in a near-term rise in US interest rates, weakening demand for gold, and tensions in the Middle East and Ukraine have failed to generate ‘safe haven’ demand for the yellow metal.
However, gold bullion dealers expect a surge in demand over the next week, when the market’s two biggest buyers of bullion — China and India — return from public holidays and enter traditional buying periods.
In the meantime, physical gold ETFs have drifted lower. The $33bn SPDR Gold Trust (NYSE: GLD.US) ETF has fallen by 0.6% to $116.74 since last Friday, cutting its gains for the year to date to just 0.5%. Over the same period, London-listed Gold Bullion Securities (LSE: GBS) has slipped 0.8% to $115.79, erasing its gains for the year and leaving the ETF’s shares trading at 2013’s closing price.
Gold mining update
Chaarat Gold Holdings (LSE: CGH) slipped after Dekel Golan, the firm’s chief executive and largest private shareholder, reported the sale of 545,064 shares in the company, reducing his stake to 5.62% of the firm’s share capital. Mr Golan said that the sale, which was worth around £87,210, was necessary ‘for personal reasons’. Chaarat’s share price fell 1.3% to 15.3p on the news, but remains up by 56% so far this year.
Following news of its planned rights issue, Petropavlovsk (LSE: POG) has continued to fall heavily. The debt-laden miner’s shares are currently trading at around 24p, down by 11% over the last week. On Thursday, major shareholder Norges Bank confirmed it had trimmed its holding below 4%, and it is possible that other major shareholders — with non-disclosable shareholdings of below 3% — may also have been selling the stock, driving the share price down due to a lack of buyers.
Russian gold miner Highland Gold Mining (LSE: HGM), whose solid interim results I commented on last week, has also suffered this week, shedding 9.5% of its value. However, the difference here is that approximately 4.6% — or 2.5p — of this decline was due to the miner’s shares going ex-dividend. The decline has left the miner’s shares trading on a forecast P/E of just 4, highlighting a potential — albeit risky — value opportunity.