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Gold Slips As Asian Demand Weakens, But African Barrick Gold PLC Moves Higher

Gold fell 2.5% to $1,295 per ounce last week, as growing confidence in the US economy combined with weakening demand in China to push the price of the precious metal below the $1,300 level once more. Gold has now fallen by more than 7% from its 2014 peak of $1,392 per ounce, in the space of just two weeks.

In the US, confidence is rising in the strength of the economic recovery, and government data indicate that hedge funds reduced their long exposure to both gold and silver during the week to March 25, suggesting they believe gold’s strong gains during the first part of this year may have reached an end.

Meanwhile in China, the price of spot gold on the Shanghai Gold Exchange has fallen to $1.40 below the London price, according to Bloomberg data, in a sign that gold demand in China may be weakening.

The main route by which traders and investors gain exposure to gold is through gold funds such as the $35bn SPDR Gold Trust (NYSE: GLD.US) ETF, which ended last week down by 1.9% at $124.56. A London-listed alternative, Gold Bullion Securities (LSE: GBS), ended the week down 2.4% at $124.20. So far this year, shareholders of Gold Bullion Securities have seen the value of their holdings rise by 4.2%, while the value of SPDR Gold Trust shares has risen by 5.6%.

Gold mining equities

While most gold mining stocks fell last week as the price of gold weakened, African Barrick Gold (LSE: ABG) edged higher towards the end of the week, thanks to a supportive round of broker updates, including an ‘overweight’ recommendation from JPMorgan Chase & Co.

African Barrick’s shares rose by 3% in early trading this morning, but they remain nearly 14% lower than one month ago, thanks to the big fall seen when Barrick Gold announced that it had sold a further 10% of its stake in African Barrick Gold.

Shares in Africa Barrick Gold have risen by nearly 150% since June 2013, but remain 50% lower than they were in early 2011, highlighting the importance of timing when investing in commodity stocks.

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