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Gold Stabilises After Fed Comments, But Randgold Resources Limited Slips On Q1 Results

Gold fell sharply on Wednesday after the chair of the US Federal Reserve, Janet Yellen, said that the current reductions in monetary stimulus were “appropriate”, given the “underlying strength” of the economy. Developments closer to home also helped cut demand for gold, after Russia’s President Putin appeared to be willing to negotiate a solution to the current crisis in Ukraine.

goldbarancoinsThese factors combined to push gold firmly back below the $1,300 mark to its current level of $1,293 per ounce, leaving it up by just 0.8% on last week’s closing price.

The main route by which traders and investors gain exposure to gold is through exchange-traded physical gold funds such as the $33bn SPDR Gold Trust (NYSE: GLD.US) ETF, which has risen by 0.8% so far this week, and is up by 5.2% so far in 2014. A London-listed alternative, Gold Bullion Securities (LSE: GBS), has gained 0.5% since Friday last week, and is up by 7.2% so far this year.

Gold mining news

Investors in gold mining equities have seen their short-term returns improve this year, as the price of gold has stabilised, but many remain underwater on 2013 prices. Randgold Resources Limited (LSE: RRS) (NASDAQ: GOLD.US) remains down by 9% on one year ago, but the FTSE 100 gold miner has gained 22% so far this year and reported record first-quarter production of 283,763 ounces today, helped by a growing contribution from its latest mine, Kibali, which began production in October 2013. Randgold reported an increase in first-quarter profit of 5%, although earnings were lower than in the final quarter of last year, due to a sharp increase in cash costs as a result of the ongoing ramp-up of production at Kibali.

Randgold’s share price touched a low of 3,600p earlier this year, but has since recovered to around 4,600p. However, investors were not overwhelmed by today’s first-quarter results, and Randgold shares were down by 1.9% at the end of the morning session, despite the firm announcing that it expects to exceed this year’s production targets, and is accelerating its exploration programme.

Investors who spotted the opportunity in Randgold Resources ten years ago are now sitting on a 915% profit. Randgold is unlikely to deliver gains like this again, but even today's bull market contains overlooked growth opportunities that may have multi-bagging potential.

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