Gold Miners Shine in Falling Market

August 28, 2013 at 08:44

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Gold miners shone on a difficult day for the wider market as growing fears the West could launch military strikes on Syria spurred investor demand for the safe-haven precious metal.

The yellow metal today rose to $1,418 (£913) an ounce – its best level since May – amid mounting unease about the threat posed to Middle Eastern stability by intervention in Syria. That in turn lifted those London-listed companies that mine for gold.

Fresnillo, a Mexican silver and gold producer, jumped 87p, or 7.1pc, to £13.10 and Randgold Resources advanced 210p to £53.35, gains that made them the second and third biggest risers in the FTSE 100 respectively. In the FTSE 250, Centamin, which mines for the precious metal in Egypt, put on 1¼ to 41p and African Barrick Gold added 3.9 to 170.3p.

It has been a volatile year for gold and the precious metals miners. Worries that the US Federal Reserve will begin to slow the pace of its quantitative easing programme saw gold plunge between April and June.

However, more recent economic data from the US – indicating the Fed may not taper its bond-buying as soon as some had feared – has helped gold rally this month.

Still, not every precious metal miner was on the front foot today.

Polymetal International slumped 68½ to 741p on broker downgrades ahead of its half-year earnings tomorrow. Analysts at both HSBC and Societe Generale cut their recommendations on the group, with the former rating the company “neutral” and the latter labelling it a “sell”.

Silver and gold group Hochschild Mining also slid 16.8 to 223.1p after influential broker Goldman Sachs repeated its “sell” stance on the company, following “in-line” interim results last week. The Goldman analysts reckon the group’s balance sheet will be “stretched to breaking point in 2014-15”.

“Despite the operationally solid set of results and cost-cutting measures the company has undertaken, we continue to believe that this will be insufficient and that Hochschild will continue to burn cash on our estimates,” they said.