Re­gain­ing its lus­tre

Finweek English Edition - - MARKETPLACE - Ed­i­to­rial@fin­

While the gold price has re­treated from its 52-week high ear­lier this month, it is up about 20% from De­cem­ber lev­els, and data from Bloomberg showed hedge fund bets on fur­ther gains in the gold price were at their high­est lev­els since 2011.

The rally in gold prices, driven in part by con­cerns over neg­a­tive in­ter­est rates in mar­kets like Ja­pan, uncer­tainty over the US Fed­eral Re­serve’s in­ter­est rate hik­ing cy­cle, and a weaker dol­lar, has also boosted gold min­ing stocks. AngloGold Ashanti, for ex­am­ple, has seen its share price gain nearly 110% since the start of Jan­uary.

Re­port­ing its re­sults for the first quar­ter on 9 May, AngloGold said it re­turned to pos­i­tive cash flow de­spite lower gold pro­duc­tion in the three months to end March. To­tal gold pro­duc­tion de­clined 11% to 861 000 ounces com­pared with the first quar­ter of 2015, but free cash flow was $70m, com­pared with a cash out­flow in 2015’s March quar­ter of $40m. The gold miner, who re­ported av­er­age cash costs for the quar­ter of $702/ oz, also man­aged to cut net debt to $2.127bn at the end of March. It said it ex­pects to­tal cash costs for the year to av­er­age be­tween $680/oz and $720/oz. To­tal pro­duc­tion for the year is ex­pected to be be­tween 3.6m and 3.8m ounces. How to trade it: Af­ter a short con­sol­i­da­tion, AngloGold Ashanti has even­tu­ally re­bounded – thereby main­tain­ing its short-term up­trend. It may pull back slightly, but sup­port should hold firmly at 20 800c/share. A long po­si­tion can be ini­ti­ated at any level above 22 400c/share, with the short to near-term tar­get sit­u­ated at 30 500c/share. We rec­om­mend a fair trail­ing stop-loss. Al­ter­na­tively, a re­ver­sal be­low 20 800c/share could see AngloGold de­pre­ci­ate to 18 800c/share.

AngloGold Ashanti's TauTona gold mine op­er­a­tion near Car­letonville in Gaut­eng

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