Possibility of future quantitative easing helps reassure U.S. markets

The U.S. Commerce Department revised its second-quarter GDP growth figure down from 2.4% to 1.6% just hours before U.S. Federal Reserve Chairman Ben Bernanke said that the economic recovery had softened more than expected. In a speech on Aug. 27 to global central bankers gathered in Jackson Hole, Wyoming, Bernanke said the Fed was prepared to take additional steps if necessary to help prop up the economy. The prospect of further quantitative easing seemed to reassure U.S. equity investors. For the week of Aug. 23-27, the Dow Jones Industrial Average slipped 62.97 points or 0.62% to finish at 10,150.65, while the S&P 500 index lost 7.1 points or 0.67% to close at 1,064.59.

Persistent economic uncertainty is continuing to support gold’s safe-haven appeal. The New York spot price for gold rose 0.82% to US$1,238.10 per oz. on Aug. 27, keeping gold in positive territory for the fourth week in a row. The Philadelphia Gold and Silver index advanced 6.01 points or 3.37% to 184.14. Buenaventura, Peru’s largest publicly traded precious metals company, topped the list of value gains with an advance of US$2.54 to US$40.47 per share, despite a fall in second-quarter net income to US$110.9 million, down 17% from US$134.4 million in the same quarter of 2009. Goldcorp. claimed the No. 2 spot with a gain of US$2.45 to US$44.34, while Seabridge Gold rose US$1.99 to US$30.35. Seabridge announced in mid-August that new metallurgical test-work has confirmed that a higher grade copper concentrate can be produced at its 100%-owned KSM project, near Stewart, British Columbia. Altogether the improvements are estimated to cut the prefeasibility base case average annual operating costs by US$12.8 million (about US$20 per oz. of gold produced) or about US$465 million over the nearly 37-year projected mine life. Newmont Mining, meanwhile, climbed US$1.93 to US$59.95, Agnico-Eagle Mines added US$1.92 to US$65.10, and Barrick Gold edged up US$1.84 to US$46.50.

Energy stocks, by contrast, generally headed south. Alpha Natural Resources, a leading Central Appalachian coal producer with significant operations in Northern Appalachia, lost US$4.50 per share to close the week at US$36.19, while Massey Energy fell US$3.11 to US$28.95. Peabody Energy slid US$1.74 to US$43.18 and Arch Coal lost US$1.48 to close at US$22.63.

In the wake of BHP Billiton’s US$39 billion hostile bid for Potash Corporation of Saskatchewan, the Canadian potash producer closed the Aug. 23-27 trading week down US$1.94 a share at US$147.73.