Gold: Can Fed Hike Be Good for Africa Mines? -- Barron's Blog

        By Dimitra DeFotis
        The bet against gold today has multiple causes, including dollar strength. But as the U.S. Federal Reserve raises rates, gold prices don't have to head lower, says Peter Boockvar, chief market analyst at The Lindsey Group.
        In mid-afternoon trading, the price of gold was at $1,107 per ounce, a decline of 2.2%, or nearly $25. Here's how Boockvar, based in Fairfax, Va., explained the new low in gold prices earlier today:
        "At about 9:30 p.m. EST last night, a large seller in a thin market puked gold by $50 ... there was disappointment with the size of last week's release of China's increase in its gold holdings although the total amount is the 5th largest of all central banks. The Wall Street Journal over the weekend printed an article called " Let's Be Honest About Gold: It's a Pet Rock." The CFTC on Friday reported that the net speculative long position in gold fell to the lowest since December '13 for the week ended Tuesday. The short side is just off the highest on record dating back to 1995 that was touched two weeks ago.
        Gold remains hated still on the stronger U.S. dollar on the belief the Fed will soon raise rates. I get this, as gold yields nothing. But what happened the last time the Fed was in a tightening cycle? In June 2004, the Greenspan Fed finally got off 1% with a rate hike and gold was about $390 at that time. By the time the fed funds rate got to 5% in May 2006 gold was at $705. In 1994 the Fed started a quick rate-hike cycle from 3% when gold was at $387. By November that year, the fed funds rate was up to 5.5% and gold was still at $387. Let's now go back to the late 1970's dramatic rate hike cycle in response to runaway inflation. In December 1976, the Fed hiked rates from 4.75% when gold was about $130. Gold peaked at about $850 in 1980 when the fed funds rate was 14% (the top in the fed funds rate in 1980 was 20%). On a short-term technical basis, the 7-day relative strength index in gold is at 13 in a range of 0-100."
        In June, RBC analysts observed "the gold price appears to have found some measure of stability" at around $1,200 per ounce said that Aureus Mining ( AUE.London) and Asanko Gold ( AKG) were its preferred mine developers, while Acacia Mining ( ACA.London) and AngloGold Ashanti ( AU) were RBC's preferred producers. See " Four Gold Stocks To Play Rising African Production."
        Shares of AngloGold, the gold miner based in South Africa, are down 8.5% today and has tumbled 26% in the past month, while shares of Asanko, a Canadian mineral explorer focused on West Ghana in Africa, are down 4.7% today and down 13% over the past month. In contrast, Brazil miner Rio Tinto ( RIO) and Australian miner BHP Billiton ( BHP), struggling as iron ore prices bottom, are down 0.4% and 0.8% respectively today. Over the past month, RIO is down nearly 7% and BHP is down 10%. See " Brazil Miner Vale Down 4%: Production Cut Neutral For Iron Ore Market."
        (END) Dow Jones Newswires

        July 20, 2015 14:07 ET (18:07 GMT)

#FX
#Forex
#SaleForex
#GoldDown
#CanFedHike
#BeGood
#AfricaMiners
#BarronsBlog