Gold Review: Hedge Funds Stay Bullish, African Barrick Gold PLC And Centamin PLC


Despite several sharp moves triggered by Russia’s incursion into Ukraine, and fears that its occupation of the Crimea region might escalate into full-blown military action, the price of gold ended last week almost unchanged, down by just 0.2% at $1,340 per ounce.

US government data showed that investors are currently more bullish on gold than at any time since December 2012. Large speculative investors such as hedge funds have now extended their long positions on gold for four consecutive weeks, using funds such as the $32bn SPDR Gold Trust (NYSE: GLD.US) ETF, which ended last week down by 0.6% at $129.09. A London-listed alternative, Gold Bullion Securities (LSE: GBS), ended the week down 0.7% at $128.73. So far this year, shareholders of Gold Bullion Securities have seen the value of their holdings rise by 10.1%, while the value of SPDR Gold Trust shares has risen by 9.4%.

However, US bank Goldman Sachs is maintaining its bearish position on gold, and believes that prices may yet fall below $1,000 per ounce this year.

The price of gold is likely to remain volatile and unpredictable — two reasons why the market has recently been rewarding individual gold miners with strong financial positions and reduced mining costs. One of the mid-cap miners that has cut costs and boosted production over the last year is African Barrick Gold (LSE: ABG), which has managed to reduce its all-in sustaining costs by 14% to $1,362 per ounce over the last year — meaning that it is hovering around break-even. African Barrick’s share price rose by 6.7% last week to 298p, leaving it up by 51% so far this year.

Other strong performers over the last month include Egyptian miner Centamin (LSE: CEY), whose share price rose by 3.9% to 58p last week, leaving it 30% higher than at the start of 2014. The firm is forecasting gold production of 420,000 ounces at a cash operating cost per ounce of $700 for 2014, an 18% increase in production compared to 2013. However, Centamin remains under a cloud of uncertainty, as the legal challenge to its mining licence by the Egyptian state has not yet been resolved.

African Barrick's dividend was cut by 81% last year, and its share price is still more than 30% 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.