Finacial Post: Gold earnings season as noisy as expected so far

The second quarter gold earnings were expected to be noisy, and they have not disappointed so far.

Writedowns, plummeting profits and a vast range of realized prices have been key themes in the reports. Most importantly, the miners are unveiling the cost and capital spending reductions they merely hinted at for most of the year. They are a crucial step to preserve balance sheet strength amid a bear market for gold.

On Thursday, Goldcorp Inc. announced it is slashing spending by US$200-million in 2013, and reiterated mine closures are a possibility if gold sinks below US$1,200 an ounce for an extended period. It also cut exploration and general and administrative expenses. Rival Agnico Eagle Mines Ltd. plans to cut more than US$200-million from next year’s budget.

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Financial Post: Colombia’s illegal gold mines flourish in global rout

Colombia’s unlicensed gold miners are proving to be resilient to the steepest price drop in 16 years and government efforts to regulate their operations.

Investments by companies including AngloGold Ashanti Ltd. are being held back as ambiguous local regulations exacerbate the effects of the global gold slump. In contrast, informal operations in remote rivers and jungle areas are flourishing. The government acknowledges that the number of producers without licenses probably has risen from the last census in 2010-2011, when they accounted for 87% of all gold mines.

“The informal sector is booming as they have much lower overheads,” Trident Gold Corp. Chief Financial Officer Andrew Smith said in an interview from Medellin. “Their great advantage is that they can operate on a much smaller scale. For international companies, just being listed is a burden.”

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Financial Post: Eldorado’s move to preserve capital signals what’s to come from other gold miners

Falling gold prices have pushed miners to make drastic changes to their operating plans, but companies with healthy balance sheets and low cost bases should adapt without much trouble, experts said.

For the miners with marginal projects or weak balance sheets, it is a very different story.

Precious metals companies have started to announce spending reductions, project deferrals and other adjustments in recent weeks as the gold price languishes below US$1,300 an ounce. Many similar announcements will be made when the senior and mid-size miners begin reporting second quarter results next week.

On Tuesday, Eldorado Gold Corp. provided a template for the types of moves its peers are likely to make. The Vancouver-based miner delayed three projects, deferred another and reduced its capital spending and exploration budgets for 2013 by a combined US$287.5-million (or 37%). Eldorado also said it will evaluate its dividend policy, though it did not announce any immediate reduction to the payout.

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Financial Post: Gold still not the best inflation fighter

As U.S. interest rates have risen, owning gold has been a loser’s game for anyone is trying to hedge against inflation.

Gold isn’t a smart inflation hedge, but many people have been using it that way because they think they have few alternatives.

A low-inflation rate has been punishing to gold investors for the past three months, and the Consumer Price Index has been running well under 2 percent this year. As evidence, the leading gold bullion vehicle, the SPDR Gold Trust ETF, has lost nearly a quarter of its value over the past year as investors continue to sell out of their positions. It was down 23 percent year to date through July 12.

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Financial Post: Investors shy away from gold, buy palladium

Palladium prices have reached their highest versus gold in more than two years this week as a rally in risk assets boosts the appeal of industrial commodities, with further rises likely as the economic recovery gains impetus.

The ratio of gold to palladium slid to 1.81 on Monday, its lowest since March 2011, as firm U.S. jobs data fuelled hopes the U.S. recovery is on track, and after Standard & Poor’s revised up its sovereign credit outlook for the United States.

Rising optimism over the U.S. economy has battered gold, which is widely viewed by investors as a hedge against financial market instability.

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Financial Post: Why this year’s gold selloff might actually be a bullish sign

Gold prices have been plunging this year and redemptions have been soaring, but not all analysts are convinced this is the start of a rush out of gold.

Prices for the precious metal are down 17% year-to-date. The big driver behind the move has been speculation that the U.S. Federal Reserve may soon move to ease its bond buying program, depriving gold of the liquidity and inflation fears that have helped propel its stellar rise in the past few years.

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The Financial Post: Mint finds people really want gold — but physical gold only

Executives at the Royal Canadian Mint have joined a chorus of precious metal experts confounded by recent activity in the market.

Two of the Mint’s senior managers on Wednesday pointed out that the demand for its gold and silver coins is soaring through the roof. Yet its exchange-traded receipts (ETRs) have traded at a discount to net asset value this year for the first time, even though they are fully convertible into physical gold and silver.

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