The big jump in prices in the 2nd half of the market
November 9, 2006
So what happened today to cause the big jump in prices in the 2nd half of the market?
China.
And an additional knock on investing in mining shares instead of physical metal, Newmont announced today that their cost of production are going to be significantly higher per ounce in 2007 than initially expected.
The stars are aligning...
Gold Gains Most Since June as Dollar Drops on China Report
By Pham-Duy Nguyen
Nov. 9 (Bloomberg) -- Gold in New York gained the most since June on speculation that China will boost purchases of the precious metal to diversify its foreign-exchange reserves.
The dollar tumbled against the euro after Reuters reported the People's Bank of China may switch some of its currency reserves. Gold, sold in dollars, generally moves in the opposite direction of the dollar. The metal is up 23 percent this year while the U.S. currency fell 7.7 percent against the euro.
"China indicated many options are being considered, and the market is inferring some reserves will go into gold," said James Vail, who manages $800 million in natural-resource stocks at ING Investments LLC in New York.
Gold futures for December delivery rose $18.50, or 3 percent, to $636.80 an ounce at 1:25 p.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest gain for a most-active contract since June 30. Prices fell 1.5 percent yesterday.
"All central banks are trying to diversify," People's Bank of China Governor Zhou Xiaochuan said at a conference in Frankfurt. "We have had a very clear diversification plan for several years."
China is the tenth-biggest holder of gold reserves. About 1.3 percent of the country's reserves are gold and 72 percent of the reserves are U.S. assets. China's trade surplus with the U.S. helped drive the country's foreign currency reserves close to $1 trillion.
Dollar Weakness
"I'm worried about a weakening dollar and bullish on gold," said Thomas Au, principal at R.W. Wentworth & Co., a New York-based consulting company. "Apparently, Mr. Zhou and company are, too."
Gold opened higher as the euro rose earlier against the dollar on speculation the European Central Bank will raise interest rates faster than the Federal Reserve.
This year's 23 percent rally in gold would be the biggest since 2002, and prices have gained every year since 2001, moving in tandem with the euro from 2002 to 2004. Last year, gold gained 18 percent, even as the dollar rose 14 percent against the euro.
Gold also gained today on expectations international- investor demand for the dollar may drop after a shift in control of the U.S. Congress. Democrats took control of the House of Representatives after 12 years of Republican rule.
"With the change in Congress, and an inferred anti- business climate, the foreign investors are souring on the dollar," ING's Vail said.
Newmont 2007 gold output cost up at $370/oz - CFO
Last Update: 12:02 PM ET Nov 9, 2006
LONDON (MarketWatch) -- Gold production costs at Denver-based gold producer Newmont Mining Corp. (NEM) will rise to around $370 an ounce during 2007, up nearly 25% on the preliminary 2006 production cost average of $297/oz and in line with the industry's expected average increase, Chief Financial Officer Richard O'Brien said Thursday.
Aside from general pressures from higher energy and labor costs that all gold miners are facing, higher production costs will be down to Newmont's drive to develop global reserves, O'Brien said.
These increases will be in line with the expected 20%-25% production cost rise for gold miners, as outlined by metals consultancy GFMS, a Newmont spokesman said.
"In 2007 production costs will rise by 20%-25% on year to range between $360 and $375/oz, in line with the industry average. Newmont expects to continue to be in line with that average," the spokesman said.
Costs have already risen to $318/oz during the third quarter, up from an average of $239/oz during 2005.
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