Gold rally sputters following US retaliation

Well, so much for the gold rally. Prices for the yellow metal began a downward trend during the Oct. 3-9 report period, falling out of a tight US$290-per-oz. trading range and quietly drifting down to US$285 per oz. at the close of trading in New York on Oct. 10.

Spot gold had risen steadily since the Sept. 11 terrorist attacks in the U.S. but began to ease off the US$293-per-oz. mark once U.S. and British forces launched major air strikes against Taliban targets in Afghanistan on Oct. 7.

While the Toronto Stock Exchange’s 300 index rose 0.4% to 8,869.32 points on the back of a resurgent oil and gas sector, the TSE’s gold and precious minerals sub-index dropped 6% to 5,117.63 points as the gold majors gave back virtually all of the previous week’s gains: Barrick Gold fell $2.39 to $25.75; Placer Dome lost 77 to hit $19.63; Franco-Nevada Mining declined $1.04 to $21.46; Kinross Gold dropped 7 to hit $1.43; TVX Gold declined 2 to 75; and Cambior traded down 2 to 83.

The mid-tier darlings fared little better: Goldcorp was up 22 to $18.70; Agnico-Eagle Mines fell 39 to $15.57; and Meridian Gold was off 30 to $16.90.

Dropping 20 to $5.64, Glamis Gold announced it had entered into a financing agreement with Research Capital, BMO Nesbitt Burns and National Bank Financial for a $40-million bought deal of 8 million Glamis shares priced at $5 each, with proceeds earmarked for the Marigold Millennium gold project in Nevada.

Junior platinum and diamond producer SouthernEra Resources acquired a 100% interest in another Millennium project — this one, a platinum-group-metal venture on the eastern limb of the Bushveld complex in South Africa. Following mapping, four shallow holes will be drilled to test the UG2 chromitite layer, and three deeper holes will target the UG2 and Merensky reefs. Over the week, SouthernEra rose 20 to $2.60 and was trading at $2.90 at presstime.

Off 5 to 53, High River Gold Mines announced it had bought an addtional 10% stake in Russian gold miner Buryatzoloto, bringing its interest to 53.5%. Buryatzoloto, Russia’s third-largest gold producer, owns and operates two high-grade, underground mines in southern Siberia.

Trading patterns were similar among gold majors in the U.S. markets: Newmont Mining fell US81 to US$23.74; AngloGold dropped US34 to US$16.29; Gold Fields was down US4 to US$4.60; Homestake Mining declined US57 to US$8.90; Ashanti Goldfields eased up US8 to US$3.43; Compania de Minas Buenaventura was down US55 to US$20.95; Stillwater Mining rose US$1 to US$20.95.

It was another grim, slow week in the base metal sector. The TSE’s metals and minerals sub-index eased off slightly to 3,427.12 points as Canada’s base metal producers languished at their recent lows: Noranda was off 47 to $14.28; Teck Cominco‘s B shares fell 15 to $10.85; Aur Resources fell 5 to $2.45; Breakwater Resources was up 2 to 22; Boliden was unchanged at 26; Inco fell 9 to $19.66; Falconbridge advanced 10 to $14.15; and Sherritt International dropped 19 to $3.70.

The only excitement came from First Quantum Minerals, which announced a 390% increase in the copper resource at its 85%-owned Lonshi deposit in Zambia. The open-pit resource has grown to 5.1 million tonnes grading 5.75% copper, or 295,000 tonnes contained copper. Quantum is now considering expanding facilities at the nearby Bwana Mkubwa mine to an annual capacity of 30,000 tonnes copper cathode. The company closed up a dime at $2.50.

The base metal sector in the U.S. markets did show some signs of life: Phelps Dodge added a nickel to hit US$27.05; BHP Billiton rose US7 to US$8.72; Rio Tinto climbed US$2.52 to US$64.65; Anglo American picked up US24 to finish at US$12.11; and WMC tacked on a nickel to close at US$15.60. Meanwhile, Southern Peru Copper dropped US15 to US$9.25.

Freeport-McMoRan Copper & Gold‘s B shares plummetted 94 to US$9.68, perhaps on concerns of rising political risk due to the company’s extensive asset base in Indonesia.