Gold price rises

The spot gold price has jumped, hitting a three day high.

The trading price rose close to a percentage point to reach US$ 1181.19 per ounce on the European market, according to Dow Jones.

It came on the back of weaker trading in Europe following poor economic data from China, coupled with a slightly weaker US dollar.

The rise is part of a three day rally after gold fell on Friday to its lowest levels since mid-March , US$ 1162.35.

Part of last week’s fall related to positive US employment data as well as news the US Federal Reserve would lift interest rates.

"With the dollar now slipping again and with some of the other markets looking a bit [like they have reached unstable highs and are likely to decline], it may be that the precious metals look relatively cheap as a safe-haven asset class should investors feel the need for a haven," William Adams, head of research at Fastmarkets, told Dow Jones.

As the gold price hovers at its current level, the market is pegging its future on stabilisation.

Speaking to Grant Thornton's Brock Mackenzie a new cost per ounce matrix is being developed, with the likelihood that if prices fall below US$1100 per ounce Standards & Poor will begin looking at credit ratings.

"The reality was that many companies were chasing production without focusing on their costs as prices were still too high to support this action, but while the price of gold increased gold stocks themselves underperformed massively," he said.

"At this US$1100 per ounce mark a lot of mines will become very marginal operations, so they are likely to close and supply will diminish and we will see likely see an upwards movement in price again, although it does depend on the US dollar."

Some miners are taking major actions to reduce debt levels in an effort to shelter their balance sheets from the market fluctuations.

AngloGold yesterday announced its decision to sell one of its major gold mines to Newmont for US$820 million in an effort to reduce debt levels, a move other gold miners may consider as this year marks the peak in world gold production and the apparent market trough, creating an atmosphere of aggressive M&A for high quality, long life mines.

AngloGold CEO Srinivasan Venkatakrishnan (Venkat) explained: “This deal significantly de-risks [AngloGold’s] balance sheet without diluting our shareholders, and places us in a much stronger position.”

Next week is predicted to be a major one for gold as markets wait on the predicted US rate rise.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.