CocoreAushell nanoparticles, stabilized with a sulfobetaine surfactant, were fabricated from a displacement reaction of Au3+ with Co nanoparticles and compressed into a granular composite. The affect of annealing the composite in a hydrogen environment was investigated and found to have a dramatic effect on the magnetic properties, size, and composition of the CoAu nanoparticles. A negative magnetoresistance was observed and exhibited a parabolic functionality with annealing temperature, increasing and then decreasing with annealing temperature. A similar behavior was observed for the coercivity, attributed to the increase in particle size with the annealing temperature. The surfactant was decomposed with annealing. (c) 2007 The Electrochemical Society.