You don't hear much about gold's rally these days, what with Facebook going public, but the price of bullion is experiencing a nice little comeback.
Since its near-term low of $1,545 (U.S.) per ounce on Dec. 29, gold has rallied 14 per cent, and the rebound has given emerging gold miners enough confidence to tap the markets for new development funds.
was the latest to do so, announcing a $250-million (U.S.) bought deal led by RBC Dominion Securities and J.P. Morgan on Wednesday. Demand was so firm that the deal was increased to $332-million this morning.
That should come as no surprise. Detour Gold came to market last week and easily raised $241-million (Canadian) in a bought deal led by BMO Nesbitt Burns and CIBC World Markets.
While there are number of factors driving gold's surge -- such as hedge funds figuring it's time to play around again -- there is at least some fundamental support. South of the border, the Federal Reserve recently announced that it now plans to keep interest rates at rock-bottom low levels until 2014, extending its timeline from 2013. Anyone who fears that this extension will lead to hyperinflation is bound to turn to gold.
Yet you can't say the latest deals were scooped up simply because gold is hot. The companies themselves gave reasons for investors to pile in. In Detour's case, the firm announced a boost to its reserves and that sent the share price soaring. The same afternoon, the firm launched its deal.
NovaGold also experienced a rally before launching, spurred by a major reorganization back in November that saw Gregory Lang, former president of Barrick Gold's North American division, become NovaGold's chief executive officer. The firm also announced it hopes to sell its 50 per cent stake in the Galore Creek project that it shares with Teck Resources.
Investors had mixed reactions to that news, first sending the stock soaring and then letting it plummet to $7.95 (U.S.). Lucky for the company, that low was on the same day that gold prices started to turn around, and the company has rallied over 20 per cent since.
However, it's worth noting that Barrick bid for NovaGold back in 2006 at a price of $14.50 per share. After climbing north of $20 in late 2007, the stock price has been up and down since and now sits at $9.42, and its down 8 per cent this morning following the offering.