PRECIOUS METALS: Gold, Silver Surge as Fed Reveals Easing Plans

--Gold, silver surge to six-month highs after Federal Reserve announcement

--Comex December gold rises 2.2% to settle at $1,772.10 a troy ounce

--Comex December silver settles 4.5% higher at $34.778 an ounce

--Easy-money policies can boost demand for precious metals as a U.S. dollar, inflation hedge

--Platinum supported by calls for strike in top producer South Africa

(Adds details on trading halt in the seventh, eighth paragraphs.)


By Matt Day and Nicole Friedman

NEW YORK--Gold and silver climbed to six-month highs Thursday, as the Federal Reserve's announced round of bond buying sparked a retreat in the U.S. dollar and in demand for a hedge against potential inflation down the line.

The U.S. central bank said that it would buy $40 billion of mortgage-backed securities each month and that it could extend those purchases if the U.S. labor market doesn't improve. The Fed also said it would extend its program known as Operation Twist, under which it sells short-term bonds and buys longer-term bonds in an effort to lower borrowing rates.

Gold and other precious metals can gain from easy-money policies similar to the ones announced Thursday as investors seek a hedge against the inflation that can result. Such policies by the Federal Reserve also can take a bite out of the dollar, drumming up demand for dollar-denominated gold.

Gold for September delivery gained $38.50, or 2.2%, to settle at $1,769.10 a troy ounce on the Comex division of the New York Mercantile Exchange, the highest settlement since Feb. 28. The most actively traded contract, for December delivery, rose $38.40, or 2.2%, to settle at $1,772.10.

The September silver contract rose 4.5% to settle at $34.716 a troy ounce, the highest since March 1.

The Fed also extended its outlook for low interest rates to mid-2015, from its previous outlook of late 2014. Low rates can send investors looking for higher yields into precious metals.

Trading in gold was halted by Comex operator CME Group Inc. (CME) twice Thursday as volume spiked before and after the release of the release of the Fed's statement. A CME spokesman said the exchange halted trading for less than a minute at 12:14:47 p.m. EDT, and again at 12:31:20 p.m. EDT.

The exchange uses such trading halts to prevent excessive price volatility.

The Fed's action was widely expected after Chairman Ben Bernanke and other officials hinted at the central bank's willingness to act should economic growth in the U.S. weaken. Gold futures gained 9% between Aug. 2 and Wednesday's close.

Even after those gains, "I think that you had a lot of people sitting on the sidelines just wanting to make sure there wasn't a surprise here" on Thursday, said Matt Zeman, head of trading with Kingsview Financial.

The day's gains could spark another leg higher in gold in the weeks ahead, said Adam Klopfenstein, a senior market strategist with Archer Financial Services.

Gold spent much of this summer in sideways trading, as investors worried about the global economy preferred the U.S. dollar at the expense of precious metals. That sparked some talk that gold's 11-year bull run could be set to stumble, and speculators grew cautious toward the metal.

After the Fed's announcements, "I think we're going to see a lot of the [gold] skeptics throwing in the towel," Mr. Klopfenstein said, adding that some of those traders were closing out bets on lower prices Thursday. "Gold is having an impressive run."

On top of the Fed news, platinum gained an additional price boost as labor unrest continued in South Africa four weeks after violence erupted at a mine owned by Lonmin PLC.

Platinum mine workers called Thursday for a nationwide strike across the sector to begin Sunday. South Africa produces 75% of the world's platinum, according to chemicals and precious metals company Johnson Matthey.

Platinum for October delivery settled up 1.8% at $1,679.50 a troy ounce.

Demand for physical platinum could exceed supply next year, said TD Securities, which forecast that prices would rise above $1,825 a troy ounce in the second quarter of 2013.

http://online.wsj.com/article/BT-CO-20120913-714170.html

Zim diamond sales to soar, platinum royalty to be doubled

Zimbabwe boosted its revenue estimate for 2012 as diamond sales are set to soar and government doubles royalties on platinum to take advantage of higher prices.

Revenue will probably reach $4-billion next year, up from an earlier projection of $3.4- billion, Finance Minister Tendai Biti said in his Budget speech in the capital, Harare.

The royalty on platinum sales will increase to 10%, while gold producers will be charged 7%, up from 4.5%, he said.

Zimbabwe, which emerged from a decade-long recession in 2009, is seeking to earn more from mining to help bolster the economy’s recovery. The Southern African nation has the world’s second-largest reserves of platinum, which is mined by companies including Anglo American Platinum and Impala Platinum Holdings. Zimbabwe also began selling diamonds this year after a partial ban on the gems was lifted.

“The resource rent collections are not commensurate with the value of minerals extracted, especially in view of the surge in the international prices of precious metals,” Biti said. “Government expects compensation for permanent loss of resources, since minerals are a depleting resource.”

Royalties earned the Zimbabwe government $44.1-million in the first ten months of the year, compared with mineral export earnings of $1.7-billion, Biti said. Platinum makes up 45% of mineral export earnings, gold 24% and diamonds 14%, he said. Mining shipments are estimated to expand 39% this year and 13% in 2012, he said.

A ban on diamond sales from Zimbabwe was partially lifted after the Kimberley Process, set up to monitor the sale of so-called conflict diamonds, allowed exports from two operations in the Marange region.

Zimbabwe has struggled to attract investment since emerging from recession two years ago because of instability in the power- sharing government. President Robert Mugabe’s Zanu-PF rules the country jointly with the Movement for Democratic Change, led by Prime Minister Morgan Tsvangirai.

The economy will probably grow 9.4% in 2012 from an estimated 9.3% this year as the finance and mining industries expand, Biti said.

He did not give estimates for government spending for 2012. Recurrent expenditure, which includes salaries, amounted to $1.68- billion in the first nine months of the year, while capital expenditure was $192-million. Total revenue was $2.1-billion, he said.

-Mining Weekly