Gold Review: Gold Hits Six-Month High As Ukraine Crisis Escalates, Mixed Fortunes For Miners [Gold Bullion Securities Limited; SPDR Gold Trust (ETF)]

Gold climbed to a six-month high last week as tensions rose in Ukraine ahead of the weekend’s referendum in Crimea. The price of gold rose by 3.8% to close at $1,382 per ounce on Friday, and touched a new high of $1,392 per ounce when Asian markets opened earlier this morning.

Gold’s ‘safe haven’ status is expected to support further gains this week, as equities are expected to remain volatile. US government data show that short holdings in gold fell by 20% in the week ending March 11, while net long positions rose by 4% during the same period. Further gains are expected for gold if western nations agree to impose threatened sanctions on Russia.

Investors are backing gold using funds such as the $35bn SPDR Gold Trust (NYSE: GLD.US) ETF, which ended last week up by 3.2% at $133.10. A London-listed alternative, Gold Bullion Securities (LSE: GBS), ended the week up 3.8% at $132.21. So far this year, shareholders of Gold Bullion Securities have seen the value of their holdings rise by 13.3%, while the value of SPDR Gold Trust shares has risen by 12.8%.

goldbarancoinsHowever, Reuters has reported that in China, physical gold is currently selling for a $5 per ounce discount to the spot price, suggesting that physical gold buyers believe prices will fall back again in coming months, and may be deferring planned purchases.

Gold mining update

Tensions over Russian involvement in Ukraine have triggered falls in the share price of London-listed Russian gold miners such as Petropavlovsk and Polymetal International, which are down 7% and 10% respectively since 1 March, when Russian armed forces entered Ukraine. However, Russia-based Highland Gold Mining has recovered from earlier losses and is trading in-line with its pre-Ukraine crisis share price.

Elsewhere, miners have been able to benefit from stronger gold prices. Kirkland Lake Gold (LSE: KGI) closed up by 5.6% at 245p last week, after the firm said that it produced 31,022 ounces of gold during the fiscal third quarter, 43% of which was produced after it had raised its cut-off grade from 0.18 to 0.22 ounces per tonne. Investors were impressed by the firm’s ability to maintain production at a higher cut-off grade, and Kirkland confirmed its fiscal year production guidance of 120,000 to 125,000 ounces. Increasing the cut-off grade has helped Kirkland cut costs, and the firm’s all-in cash cost per ounce produced fell by 40% during the quarter from $2,528 per ounce to $1,513 per ounce.

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> Roland does not own shares in any of the companies mentioned in this article.