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Citi: Many Gold-Mining Companies Losing Money Despite Cutting Costs

Citi Research remains downbeat on the gold-mining sector. Companies have cut costs and got help when local currencies weakened against the U.S. dollar, Citi says. Still, the bank estimates that roughly 50% of gold companies were cash negative during June, compared to 40% in March. “This is as gold has fallen a further 2% from Mar-15’s average of $1,218/oz to $1,193/oz during Jun-15,” Citi says. “We maintain our thesis that further cost-cutting and high-grading to improve margins will have long-term detrimental effects. We continue to caution that a slowdown in capex will result in a fall in production in the long term. We maintain our bearish view on the sector.”

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

 

HSBC: Gold Moves Could Be Limited In Aftermath Of FOMC Decision

Thursday September 17, 2015 10:38

Gold moves in either direction could ultimately be limited after Federal Open Market Committee policy-makers’ decision on whether to hike interest rates Thursday, says HSBC. “If they do not raise rates, gold prices would likely rally in the aftermath of the Fed decision,” HSBC says. This especially would be the case if the U.S. dollar weakens, the bank says. “The run-up is likely to be primarily a ‘knee-jerk’ reaction, however, as the rate debate would probably only be postponed and gold investors would then face renewed speculation over a rate hike later in the year,” HSBC says. “The upside may therefore be limited as gold also rallied significantly on the first day of the FOMC meeting.” Conversely, if the Fed does raise rates, HSBC analysts say they would anticipate gold prices to decline. “Again, however, the reaction would likely be ‘knee-jerk.’ The gold market has been on the defensive since 2013, in large part because of near universal expectations of a shift in Fed policy. The gold market, therefore, has had a considerable time to adjust prices to a higher rate environment.” Further, a sharp drop in prices say below $1,100 an ounce could also trigger a physical response by price-sensitive emerging-market buyers, which could also stabilize the market, HSBC adds.

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

 

 

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