Gold delivered strong gains for commodity investors last week, as comments from Janet Yellen, the new head of the US Federal Reserve, gave markets confidence that the Fed is unlikely to make significant cuts to its monetary stimulus programme in the near future. The price of gold rose steadily all week and by Friday’s close had risen by 4.0% to $1,318 per ounce.
Of course, the only practical way for most private investors to invest in gold is through exchange-traded funds. The largest gold ETF, the $32bn SPDR Gold Trust (NYSE: GLD.US), ended last week up by 3.5% at $127.15, while London-listed Gold Bullion Securities (LSE: GBS) ended the week up 3.4% at $126.55. So far this year, shareholders of Gold Bullion Securities have seen the value of their holdings rise by 8.5% while the value of SPDR Gold Trust shares has also risen by 8.5%.
The week’s biggest mid-cap riser was Petropavlovsk (LSE: POG), which gained 25% to 91p. The firm entered into extensive forward sales contracts last year in order to protect itself from the falling price of gold and the risk of breaching its debt covenants, but these hedging deals expire this year, leaving the firm, which has net debts of $945m, exposed to the market price of gold.
Mexican silver and gold miner Fresnillo (LSE: FRES) climbed 20% to 971p last week, helped by the strong performance of gold and silver and by news that the firm received the backing of a district court in its bid to have the suspension of its explosives permit covering the Herradura and Soledad mines lifted.
African Barrick Gold (LSE: ABG) rose by 16% to 273p last week, helped by the rising price of gold and by news that it delivered production of 641,931 ounces of gold last year, ahead of guidance and a 3% increase on 2012. The firm’s cash costs per ounce sold were 12% lower at $827, but investors might want to note that African Barrick’s all-in-sustaining costs of production were $1,362 per ounce — above the current price of gold, albeit 14% lower than they were in 2012.
African Barrick's dividend was cut by 81% last year, and its share price is still nearly 40% lower than it was two years ago, highlighting the importance of timing when investing in commodity stocks. The Motley Fool's "Millionaire Report" covers this topic and others in depth, and explains how building a life-changing million-pound portfolio may be more realistic than you think. For full details, click here to download your free copy of this exclusive special report, while it's still available.
> Roland does not own shares in any of the companies mentioned in this article.