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Barclays: Mixed Movement In Cash Costs For Gold Production

Friday March 14, 2014 2:23 PM

Barclays reports mixed movements in cash costs for gold output in the fourth quarter. “In our view, because the improvements were not driven by fundamental drivers, such as better grades, better technology or falling labor and electricity costs, it will remain difficult for overall average cash costs to grind lower,” the bank says. “In the fourth quarter, the bank says, the quarterly average (50th percentile) for cash costs rose 3.2% to $675 an ounce. Marginal (90th percentile) cash costs fell 6.3% to $966/oz. Annual cash costs moved similarly, rising 7.2% to $721 on average, but falling 4.6% to $1,053 on the margin, Barclays reports. “This is a trend that we expect to continue, as the underlying fundamental dynamics have not changed; likewise, room remains on the margin for producers to cut administrative costs and address their highest-cost mines. Thus, our base case for gold cash costs is for average cash costs to remain stable or increase slightly, while marginal cash costs should continue to improve in the short term as producers optimize their production portfolios.”

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


TDS: Gold Underpinned By Crimean Fears But Vulnerable Once Tensions Cool

Friday March 14, 2014 1:45 PM

Gold remains underpinned by geopolitical tensions surrounding the Crimean region of Ukraine, although the market could be vulnerable to a corrective pullback if the situation calms down, says TD Securities. “With Sunday’s referendum (in Crimea on joining Russia) fast approaching, the markets are extremely jittery as no one can predict with confidence what the repercussions will be,” TDS says. “Talks have stalled between Russia and the U.S., and we shall soon see if (Russian President Vladimir) Putin continues his defiance against threats of ‘consequences’ from the U.S. and U.N.  Gold continues to embrace this geopolitical risk, making new (six-month) highs to $1,388 today.” TDS adds, however, that adds that gold is “becoming increasingly vulnerable to a big pull back once this settles down. Gold is now almost $100 above its quarterly average.” Shortly after the Comex pit closed, April gold was $6 higher to $1,378.40 an ounce after hitting its strongest level in half a year at $1,388.40.

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


MKS: Potential For 'Fireworks' In Gold After Crimean Election

Friday March 14, 2014 8:13 AM

There could be some “fireworks” in gold when the market opens Monday in the Asia-Pacific region after a referendum in Crimea Sunday on whether to leave Ukraine and join Russia, says MKS (Switzerland) SA. Geopolitical tensions surrounding Ukraine, coupled with nervousness about China after soft economic data and the country’s first corporate bond default, have supported gold lately. “Uncertainty in Ukraine is set to come to a head this weekend with the Crimean referendum scheduled for Sunday,” MKS says. “Despite the West threatening sanctions against Russia and questioning the legality of a Crimean annexation, Russia has not backed down. Whether the referendum goes ahead or not, and regardless of the result, expect some fireworks on the open next Monday.”

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


UBS: Gold Correlations With Other Assets In Line With Historical Trends

Friday March 14, 2014 8:13 AM

Gold’s current interaction with other assets is in line with historical behavior, says UBS. “Gold’s relationship with equities has consistently stayed in negative territory since January, as investors started to increasingly turn to gold as a good hedge against risk assets,” the bank says. “The 20-day rolling correlation versus the S&P 500 Index currently sits at minus 0.28 and this is the longest period since mid-August to October last year that gold has maintained its negative relationship with equities.” Gold is also moving opposite of the dollar, with the one-month correlation at minus 0.26. “Interestingly, gold’s relationship with crude oil has also returned to positive territory of late,” UBS adds. “The three-month correlation between gold and Brent crude oil has increased sharply since late February and is now back to levels last seen in November last year around 0.40.”

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


HSBC: Any FOMC Guidance Meaning Potential For Higher Rates 'Precarious' For Gold

Friday March 14, 2014 8:12 AM

Any changes in the Federal Reserve’s forward guidance that hints at higher interest rates would be “precarious” for gold, says HSBC. The Federal Open Market Committee meets next week. HSBC’s chief U.S. economist, Kevin Logan, says the committee is likely to alter forward guidance by replacing references to the dual thresholds of 6.5% unemployment and 2.5% inflation with more qualitative guidance. In order to bolster its forward guidance, the FOMC may also indicate that when it does eventually start to raise short-term rates, the increase is likely to be gradual, he says. HSBC’s U.S. economists expect the FOMC to announce another taper in its asset-purchase program by $10 billion, in line with market expectations. “While gold prices have largely factored in quantitative easing tapering, the possibility that the FOMC may introduce the prospect for an increase in interest rates would put gold in a precarious situation, in our view, as gold is historically highly sensitive to changes in interest rates and interest rate expectations,” says Jim Steel, precious-metals analyst with the bank.

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


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