All Eyes on Gold

The metals sector was strong last week despite the Asian holiday, a stronger dollar and weaker oil.Copper jumped 7.2% and surged through key resistance while nickel (+10.6%) and lead (+4.3%) made new highs. This time of year is traditionally supportive to the metals as Chinese demand tends to recover following its New Year celebration and construction typically picks up in Europe and North America as the weather turns warm. All eyes are on the gold market as we approach the $700 resistance area. Currently there is talk of a Peruvian gold mine going on strike which would threaten supply and overnight AngloGold Ashanti (AU) posted a $97 million profit for the last quarter ending in March. In a bigger picture there are other supportive factors occurring. More and more gold mining companies are limiting their hedging practices and last week the Granddaddy of them all, Barrick (ABX) unwound a large hedge and took a loss on the position. Prior to this Barrick had been active in hedging - selling much of its production at pre-determined prices. Now, however, it spent $557 million to get out of its hedging contracts and this allows the company to take full advantage of rising gold prices.