Gold surged back above the $1,300 level last week on news that the US President Obama had authorised air strikes against militant targets in Iraq. Since then, the price of gold for immediate delivery has remained strong, touching a high of $1,322 per ounce on Friday, before slipping back to consolidate around the $1,306/oz. level.
However, news that Russia’s President Putin has sent a humanitarian mission to deliver aid into eastern Ukraine has raised suspicions that the move might be intended to disguise Russian troop movements, giving gold further impetus for a rise to its current level of $1,311 per ounce.
The share prices of physical gold ETFs have performed similarly strongly: the $34bn SPDR Gold Trust (NYSE: GLD.US) ETF has risen by 1.3% to $125.96 since last Tuesday, leaving it up by 8.5% so far this year, while London-listed Gold Bullion Securities (LSE: GBS) has risen by 1.4% to $125.84 over the same period, leaving it up by 8.8% so far in 2014.
Mining market update
There’s been action in the mid-cap mining market, too. Canadian gold producer Kirkland Lake Gold Inc (LSE: KGI) is up 9% to 248p today, and has gained 23% over the last week, taking its year-to-date rise to 69%.
Kirkland’s share price appears to have been weighed down by selling pressure from a major institutional shareholder which reduced its stake in the firm at the start of August, but this week’s first-quarter production update confirmed that the firm’s plans are on track, with a 22% improvement in head grades so far this year, and 40,528 ounces of gold mined during the first quarter, leaving the firm on track to hit 2014/15 production guidance of between 140,000 and 155,000 ounces of gold.
Another mid-cap miner that has outperformed the market this year is Highland Gold Mining Ltd (LSE: HGM) which is up by 17% so far this year — not bad considering that all of its operations are in Russia. The miner released a trading statement today reporting first-half production of 120,121 ounces, up by 13.7% on the same period last year. Production is expected to top 300,000 ounces for the full year, and if last year’s attractively low all-in sustaining costs of $842 per ounce are maintained, the firm’s attractive valuation could prove to be a bargain: Highland Gold currently trades on a 2014 forecast P/E of 6 and offers a prospective yield of 5.9%.
