Gold is known to be one of the most popular investments since the credit bubble in the latter half of the last decade. There are many reasons why including its status as a safe-haven and a store of value. After a brief pause in the past 18 months, interest in gold is picking up as macroeconomic concerns in Europe continue to be tenuous, at best. With that, we have seen gains in gold. The Gold ETF (GLD) was on a 5-day winning streak before last Wednesday (March 20, 2013), as well as posting a 3-week high.
The share prices of gold miners typically follow the price of gold, as their cash flows heavily depend on the price of gold. Therefore, gold stocks have seen their shares in demand with the increase in gold prices. Many gold miners like Newmont Mining (NEM), Yamana Gold (AUY), and Agnico-Eagle Mines (AEM) saw their shares catch a bid.
All of those companies are some of the largest and most stable in the industry. Investors weigh risk and reward in every investment and the gold majors are typically low risk low reward types. Small companies are where the high risk high reward stocks can be found. That phenomenon can be seen in the results of Goff Corp (GOFF.OB). While a stock like Yamana Gold posted gains of 7% over a 5-day period, Goff Corp posted a gain of 10% on Wednesday.
The catalyst for the rise was a press release the company released Wednesday morning documenting its plans for a multi-phase exploration program for its newly acquired La Frontera Gold Project in Dept. Of Caldas, Colombia. The exploration program on La Frontera is being planned for strategic exploration on known targets and the development of other targets for gold and silver.
The company’s main area of focus will include the La Frontera mine worked for 15 years by small Artisanal miners in the region. On the same lease, a collapsed tunnel known as The Bramadora has been located, which according to workers in the region, was made by a company with the same name about 10 years ago. The company’s President added that data gathered on the project to date suggests that the La Frontera leases offer “highly prospective” gold and silver targets.
Now that we took a quick look at the market action, we will take a look at some of the news events that gold investors have been paying attention to this week. Two of those events include the US Federal Reserve’s policy announcement as well as the events in Cyprus. Gold highly depends on the policy of the United States because the metal is priced in gold so any changes in the value of the dollar, impact gold prices directly. The U.S. Fed announcement was in-line with expectations as the U.S. Central Bank said it will continue purchasing $85 billion a month in Treasury and mortgage-backed securities, and keep its benchmark for interest rates at virtually zero “until the outlook for the labor market has improved substantially in a context of price stability.”
In Cyprus, which is in the midst of debt talks , the situation has been more market-moving. Cypriot officials have said the country’s banks, which were closed to prevent mass withdrawals, will remain shut until at least Tuesday. On Wednesday afternoon the cabinet began an emergency meeting to discuss alternatives to an EU-IMF bailout deal rejected by parliament on Tuesday.