Gold regains lost ground

By Christopher Galbraith | 19 May 2017

The price of gold spent the first quarter of 2017 rallying back from its late 2016 slide, trying to regain momentum after a hard fall in the December 2016 quarter.

According to the World Gold Council, gold demand fell 18% in the March quarter, relative to the year-ago quarter. The drop in demand is largely attributed to a massive pullback from investment in exchange-traded funds, or ETF.

Meanwhile, gold production also continues to grow, to about 23.6 Moz. This is slightly down from the 24.0 Moz produced in the final quarter of 2016 but is still up more than 1% over March 2016 quarter.

In the more significant local markets, the strong U.S. dollar gold price is being balanced by softening local currencies. The ruble has continued to slide in 2017, ensuring that the price of Russian gold has remained fairly flat, while the London Bullion Market Association dollar gold price has shot up over the same period. Similar trends can be seen with the South African rand and the Australian dollar.

gold prices

In January, the top 200 gold companies increased their market value 12% over December 2016, and in the subsequent two months the value fell only 2%. The overall strengthening of the gold price and positive first-quarter earnings reports for the producers are likely to see the overall market value increase further during the second quarter.

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Newmont Mining Corp. passed Barrick Gold Corp. to become the largest producer in March quarter. Newmont's production was up almost 9% (98,000 oz) over year-ago quarter, largely driven by new production at Long Canyon and Merian, as well as greater yields at Cripple Creek and Victor.

Five significant operations have already started up in 2017. OceanaGold Corp. poured first gold at Haile in January, while TMAC Resources Inc. followed at Hope Bay in February. Eldorado Gold Corp. commissioned a phase II expansion at Olympias, allowing the mine to move past tailing and process fresh ore. Indonesian miner PT Merdeka Copper Gold Tbk. finally completed work at Tujuh Bukit in March, while Rye Patch Gold Corp. commissioned Florida Canyon in April. Pretium Resources Inc. has not yet produced gold at Brucejack, but the Canadian junior, in which China's Zijin Mining Group Co. Ltd. owns a 4.99% stake, has begun commissioning the mill, and gold pour is expected in the third quarter.

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The majors made some big deals in the March quarter as well, with a handful involving operating mines such as Barrick's sale of 50% of Veladero to Shandong Gold Mining Co. Ltd. However, most involve late-stage assets, such as Goldcorp Inc.'s entry into Cerro Casale and its deal with Barrick to merge the project with the nearby Caspiche project, which Goldcorp inherited in its acquisition of Exeter Resource Corp.

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Gold regains lost ground

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