The gold price trended downward this week on the back of new data out of the US.
Although it peaked above US$1,860 per ounce on Tuesday (February 14), the yellow metal couldn’t maintain that level and fell as low as US$1,828 on Thursday (February 16). It was just below US$1,840 at the time of this writing on Friday (February 17).
Tuesday brought the release of the latest consumer price index data, which shows that inflation rose 6.4 percent year-on-year in January and 0.5 percent month-on-month. Both numbers were higher than market watchers expected, and solidified the idea that the US Federal Reserve still has work to do when it comes to taming high prices.
The latest producer price index reading came out on Thursday, and it added fuel to that fire. It was up 0.7 percent in January, which is the largest increase since June 2022. Meanwhile, retail sales increased by the most in nearly two years last month.
Investors will have to wait and see what the Fed does next, but it’s worth noting that numerous central bank officials, including Chair Jerome Powell, have commented on the need for more hikes this year.
B2Gold to buy Sabina, Newcrest rejects Newmont
This week also brought more M&A activity in the gold space. On Monday (February 13), B2Gold (TSX:BTO,NYSEAMERICAN:BTG) announced plans to acquire Sabina Gold & Silver (TSX:SBB,OTCQX:SGSVF) in a deal worth about US$824 million.
B2Gold currently has three operating gold mines in Mali, the Philippines and Namibia, as well as various exploration and development projects in other countries. By purchasing Sabina it would gain access to the company’s Back River Gold District in Nunavut, which is made up of five mineral claims, the most advanced of which is called Goose.
“The acquisition of Sabina represents an exciting opportunity to develop the significant gold resource endowment at the Back River Gold District into a large, long life mining complex” — Clive Johnson, B2Gold
Sabina President and CEO Bruce McLeod has commented positively on the transaction, which implies a 45 percent premium on Sabina’s TSX closing price as of the date the companies signed a non-binding letter of intent. The purchase is expected to close in the second quarter of this year if all regulatory and shareholder approvals are secured.
“With a two-year construction period until first gold production, we believe that additional value can be unlocked by participating as shareholders of a major gold producer with the northern experience and financial resources to optimize the Goose project and this prolific belt” — Bruce McLeod, Sabina Gold & Silver
B2Gold and Sabina weren’t the only gold companies making moves this week. Newcrest Mining (TSX:NCM,ASX:NCM,OTC Pink:NCMGF) rejected advances from Newmont (TSX:NGT,NYSE:NEM), saying that its offer doesn’t represent sufficient value for its shareholders. Newcrest has left the door open to an improved bid from Newmont, but so far has not received a response.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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