Today has seen both Serabi Gold (LSE:SRB) and Condor Gold (LSE:CNR) raise money at a very small discount to their market price, potentially reflecting an increasing appetite for gold on the market.
Condor raised £2.5m by placing shares at 43p each, just a touch below yesterday’s 45p closing price, with the majority of the proceeds coming from existing shareholders. The money will be used to see it through the final stages of permitting a processing plant in Nicaragua with the capacity to produce 100,000oz gold per annum.
Meanwhile, Serabi announced that mining-focused private equity group Greenstone Resources has invested $15m to acquire a 29.8pc stake in the company. The funds will be used to drill and extend the life of mine at the company’s Palito and Sao Chico projects. Serabi hopes the money will give it a ‘strong platform’ to become a 100,000oz per annum gold producer within two years. The shares were purchased at a 3.6p each, a discount of just 0.6pc to Serabi’s closing mid-price of 2.6p yesterday.
The two firms’ ability to get funding at such an attractive price could reflect renewed interest in gold across the market. After all, yesterday saw gold hit a two-week high after the US Federal Reserve raised interest rates and suggested that it will carry out just two further hikes this year rather than the four or five that had been priced in by markets.
The metal, which is typically used by investors as a safe haven during periods of volatility, has also been lifted by renewed anxiety around strained relations between the US and China. This comes after Trump signed an executive memorandum on Thursday that will impose tariffs on up to $60bn in Chinese imports. In response, China has proposed a list of 128 US products as potential retaliation targets.
With prices likely being driven upward by inflation worries and fears of a trade war, it will be interesting to see if the trend continues. Earlier this month, ValueTheMarkets.com wrote that it is worth keeping an eye on the US Dollar Index, since a decisive move either way will likely dictate Gold’s next price trend. Continued Dollar weakness could spark the beginnings of the next Gold bull run and holding horns on the next stampede might not be such a bad idea. Particularly in the event that we see any further red flag waving market corrections.
Author: Daniel Flynn
Disclosure: The author does not own shares in the companies mentioned.