Possible US rates hike may dim gold, says AngloGold

GOLD may test lower levels as the US deliberates over interest rates before the metal can recover from recent “overcooked” weakness, according to AngloGold Ashanti.

“Everything hinges on what the US Federal Reserve is going to do,” Srinivasan Venkatakrishnan, the chief executive of the third-largest mining firm of the metal, said yesterday.

“In the near term we expect it to be volatile, potentially testing the downside.”

Gold may trade from $1 050 (R13 543) to $1 300 an ounce, and “you can’t rule out” a decline to $1 000, Venkatakrishnan said.

The metal climbed 0.2 percent to $1 117.20 by 11.39am in London trading, and is down 5.7 percent this year. It touched a more than five-year low of $1 077.40 an ounce last month.

Investors are snubbing gold as an expanding US economy pushes the Fed closer to raising rates, curbing the appeal of bullion that does not pay interest. Low inflation, a rally in equities and a stronger dollar also weighed on prices.

More than three quarters of economists Bloomberg surveyed on August 7-12 said that the US central bank would raise rates next month.

“If for some reason it decides it’s not going to hike this year and will push it into next year, with time I’m certain we’ll start to see gold get a good kick upwards,” he said.

AngloGold is seeking to mitigate against a further plunge in prices. The company planned to cut costs, including selling a stake in its Obuasi mine in Ghana, and would “harvest” mines nearing the end of their lives to extract the last of their profitable gold, rather than shut them, the chief executive said.

All-in sustaining costs were $928 an ounce, 12 percent lower than a year ago and better than the $1 004 an ounce expected by analysts. Production was 1.01 million ounces, compared with the estimate of 1 million ounces.