Regaining its lustre
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