U.S. stock prices bounced back strongly on Aug. 10 and 11, as the market digested news of the most recent Federal Reserve rate increase. But the S&P 500 index, which rose 1%, to 1,075.79, and the Dow Jones Industrial Average, which took back 1.3%, didn’t recover all their losses of the previous four days.
The interest rate hike brought strength to the U.S. dollar, which translated, as usual, into weakness in the gold price and in gold shares. Bullion prices fell as far as US$393.85 (in the London afternoon fix) as the U.S. dollar recovered against most currencies, except the now-fashionable rand.
The market took well to the announcement from Gold Fields that it would be the white knight for Iamgold, bidding Gold Fields shares up US12 to US$10.70. The deal — effectively a purchase of Gold Fields assets outside southern Africa for Iamgold paper — would see the two companies set up Gold Fields International, 70%-owned by Gold Fields and 30% by Iamgold shareholders.
The rising rand ripped into results at Durban Roodepoort Deeps, which reported a net loss of US$42.3 million, including an operating loss of US$27.3-million, in the second quarter, on revenues of US$80.3 million. Shares fell US74 to US$1.64 in the last two days. The falling U.S. dollar exchange rate with the rand has played havoc with Deeps’ South African strategy of turning around high-cost gold mines. In contrast, its narrow-vein Tolukuma gold mine and its 20% interest in the Porgera gold mine, both of which are in Papua New Guinea, made a US$14.5-million operating profit.
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