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Federal Reserve Rains On Gold Stocks' Parade

(Kitco News) - Comments from Federal Reserve officials not only rained on gold’s parade this week but also threw cold water on the red-hot rally in gold- and silver-mining stocks so far in 2016.

Around the close of the stock market on Wednesday, Comex April gold futures were at $1,220.60 an ounce, which was a loss of $33.70, or 2.7%, over the first three days of an abbreviated trading week -- ahead of the long Easter weekend in many nations. Comex May silver was down 55.6 cents, or 3.5%, during that timeframe to $15.255 an ounce.

The metals rose Tuesday after terror attacks in Brussels, but did an abrupt about-face Wednesday, selling off heavily as it became apparent that a number of Federal Reserve officials are still considering rate hikes beyond the one that occurred in December. Regional Fed presidents James Bullard, Charles Evans, Patrick Harker and Dennis Lockhart all hinted at potential tightening.

Against this backdrop, between the closes last week and Wednesday, the NYSE Arca Gold Bugs Index (HUI) lost 13.2773 points, or 7.3%, to 168.0440. The Market Vectors Gold Miners exchange-traded fund (GDX), which consists of stocks of gold-mining companies, fell $1.58, or 7.7%, to $19.03 per share.

The weakness in mining shares appeared to be largely on the back of the tumble in gold itself. The world’s two largest miners, Newmont Mining Corp. and Barrick Gold Corp., both declined 10% through Wednesday. Newmont shares (NYSE: NEM) lost $2.81, while Barrick (NYSE: ABX) gave up $1.47.

Shares of both companies gapped lower on Wednesday, just like the Arca Gold Bugs Index and Market Vectors Gold Miners ETF. Barrick ran into one challenge this week – Reuters reported that a federal judge granted class certification for a U.S. class-action lawsuit filed against the company, alleging that Barrick misstated facts of its now-halted Pascua-Lama gold-mine project on the border of Argentina and Chile.

Pacific Booker Minerals (TSXV: BKM) shed 35 cents, or 26%. Shares of the company, which is in the advanced stage of developing a copper/gold/molybdenum deposit on the Morrison property in British Columbia, seemingly have a tendency to make big moves even in weeks in which it does not announce any fresh news.

Diversified miner First Quantum Minerals (TSX: FM), lost $1.47, or 18%. Centamin (TSX: CEE) shed 26 cents, or 14%. Also, New Gold Inc. (NYSE MKT: NGD) lost 39 cents, or 10%.

Excellon Resources Inc.(TSX: EXN) was the biggest percentage gainer during a week in which few shares of precious-metals companies were in the black as of Wednesday’s close. The company’s stock added 10.5 cents, or 25%. The gains came ahead of the company’s release of fourth-quarter earnings early Thursday. Excellon reported an adjusted fourth-quarter loss of $1 million, or 3 cents per share.

“During 2015, we laid the groundwork for a return to high grade and low-cost production at Platosa,” stated Brendan Cahill, president and chief executive officer.

Richmont Mines (TSX: RIC) climbed 51 cents, or 8%. Great Panther Silver Ltd. (NYSE MKT: GPL) rose 29.9 cents, or 3%.

By Allen Sykora of Kitco News; asykora@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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