Friday 6th May 2016 saw the FTSE 100 Shares Index drop following the publication of U.S. jobs data which raised further concerns about the state of the US economy. Doubts increased as to whether the US Federal Reserve will be able to raise interest rates further in 2016.

Such conditions often favour the Gold price as the precious metal is seen as a safe haven in turbulent markets.
True to form, the Gold Price rose 1.6% to £894 per Troy Ounce, almost to a two and a half year high.

This return to pricing levels unseen since the Autumn of 2013 triggered renewal of interest in Gold Mining companies with shares in Randgold Resources Ltd rising 6.6 percent and in Fresnillo PLC rising 6.2 percent. These rises were a major influence in the FTSE reversing the earlier losses and ending the day up just 0.1 percent.
Both of these major mining companies have added about 50% to their valuations this year.

Randgold operates primarily in sub-Saharan African whilst Fresnillo is renowned for its operations in Mexico. Fresnillo is the world’s largest Silver producer and the second largest Gold producer in Mexico.

Investors in both of these companies are yet to see substantial benefits in the form of large dividend payments this year but both companies have benefitted from the 25% rise in the Gold price since New Year.
Randgold in particular has also been working hard to reduce operating costs, slashing Gold production cost per ounce by an impressive 29% at the flagship Loulo Gounkoto Mine in Mali.

Fresnillo have also responded to the recent upturn in Gold prices by announcing the Centauro Extension Project, a $110 million extension of the company’s Herradura Dynamic Leaching Plant in Sonora State, Mexico. The introduction of a second production line at this plant will produce an estimated 36,000 ounces of additional annual Gold production capacity.

What we may be seeing is confirmation that the Gold price has finally bottomed out and that sustainable rises are on the horizon. Renewed investment and development plans from these two major mining companies certainly suggests that the miners are aware of the possibility.

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