LONDON - As mistrust continues to infect markets, booming emerging market demand for commodities remains something that can be relied upon. To illustrate this, firmer metal prices sent shares in mining companies soaring on Monday.
Xstrata (other-otc: XSRAF.PK - news - people ) was up 4.5%, at £32.85 ($66.41), while Antofagasta (other-otc: ANFGY - news - people )gained 3.7%, to 819.50 pence ($16.57), and Vedanta Resources (other-otc: VDNRF - news - people ) rose 3.6%, to £22.12 ($44.72) on Monday afternoon in London.
Leading all the gainers was BHP Billiton (nyse: BBL - news - people ), up 4.8% at £17.36 ($35.10), on news that it would soon announce a discovery of the world's largest gold resources at its Olympic Dam mine in South Australia. (See: "The Veritable Mother Lode For BHP")
After earlier gains, Forex gold was down $2.10, at $733.25 an ounce, in afternoon trading in London, while silver was up 15 cents, at $13.62 an ounce. Copper was up 1.2%, or $98, at $8,075.50 per metric ton.
The rising price of gold over six straight years has been buoyed not only by the commodity boom but by the weak dollar, for which it acts as an alternative investment. The greenback has been hit hard in recent weeks by a 0.5% cut in American interest rates and weaker-than-expected economic data that has raised fears of a recession. (See: "Notes On The News: U.S. Dollar Hits New Lows")
"Prices remain supported by the continued dollar weakness," analysts at Barclays Capital said in a note. "This week the dollar and in turn gold prices are likely to take their direction from the key US data releases."
The Russian gold mining company Peter Hambro Mining also released a set of better-than-expected half-year results on Monday, sending its shares up 4.2% to £12.09 ($24.44) on Monday afternoon in London. Total gold production had increased by 5% and overall production is expected by analysts at Citigroup to quadruple between 2005 and 2010.
Citi analyst Craig Sainsbury, who has a "buy" rating on the stock and a price target of £18.00 ($36.40), said Peter Hambro was one of the lowest-cost gold miners in the world. But since the company conducts most of its business in Russia, the stock was still high risk: "The company suffers from a higher level of political and sovereign risk than the likes of BHP, Rio Tinto (nyse: RTP - news - people ) or Xstrata," he said. "If the impact of these risk factors is greater than we currently anticipate, then the share price likely won't reach our target price."
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