‘Tough times’: Gold prices sink below US$1,200 for first time in nearly a year
Wednesday was a bad day for Canadian gold stocks as bullion fell below the key psychological mark of US$1,200 an ounce for the first time since February.
Gold futures lost 1.8 per cent of their value or US$21.90 to settle at US$1189.30 amid strong U.S. economic data that sent the U.S dollar to a near 14-year high against a basket of currencies.
Gold prices — which have fallen about six per cent since the U.S. presidential election on Nov. 8 — have an inverse relationship to the U.S. dollar. A stronger greenback makes gold more expensive because the metal is priced in U.S. dollars.
Encouraging U.S. data released Wednesday — including better than expected consumer confidence figures, a pick-up in factory orders and Federal Reserve officials indicating the labour market has tightened — seemed to solidify the case for the Fed to raise interest rates next month. Traders have already priced in a 90 per cent chance rates will rise.
Investors have been getting out of gold as equities markets reach record highs. Gold is headed for its second monthly decline as market observers expect U.S. President Donald Trump to ramp up fiscal spending.
The materials group, which includes gold and base metals miners and accounts for 12 per cent of the Toronto Stock Exchange lost nearly 3 per cent of its value Wednesday. Stock in the world’s biggest gold miner, Barrick Gold Corp., fell 5.4 per cent to $19.53.
Iamgold Corp., which was providing investors and analysts with an operational update Wednesday saw its shares fall by the greatest percentage among gold miners on the TSX — down 8.5 per cent to $4.75.
Executives aimed to reassure investors and analysts that its focus on controlling costs will help it ride out the low-price environment.
“We can’t count on (the price) to take us out of tough times,” said CEO Stephen Letwin.
“We are in control of our cost structure, we continue to relentlessly pursue the reduction of those costs.”