Posts Tagged ‘Gold Discovery’
Saturday, September 4th, 2010
Gold Market Diary (September 7, 2010)
For the week, spot gold closed at $1,246.75 per ounce, up $8.65, or 0.70 percent for the week. Gold equities, as measured by the Philadelphia Gold & Silver Index, rose 1.45 percent. The U.S. Trade-Weighted Dollar Index fell 1.09 percent for the week.
- According to a Citi report, the downtick in equity flows isn’t just a cyclical trend but a secular shift into fixed income. The average investor only has an ultra low 6 percent weighting in fixed income. Gold would certainly be even less. Incremental shifts toward safer investments should continue to be supportive of gold.
- The gold trade appears to be still early. If the seeds of inflation are being properly planted, gold can continue to do very well. From 1970 to 1980, adjusting for inflation, the S&P 500 only compounded at 0.80 percent rate per year for the decade while the Toronto Gold & Precious Minerals Index (adjusted to U.S. dollars) compounded at 25.1 percent return per year.
- On Friday, the acquisition activity jumped in gold stocks as a friendly and a competing hostile bid were launched for the owner of a high-grade gold discovery—one of the top discoveries of the decade.
- The risk of owning the wrong gold stock—one with low-grade reserves—is heightened. Some popular companies have been cited as the next take-out targets over the past month and their share prices have been bid up to levels which would be commiserate with an $8,500+ gold price. In a competitive environment, you cannot buy low-grade ounces for top dollar and expect to earn a return on capital that is above peers.
- Although South Africa’s gold production rose in the second quarter, it was still down 7 percent in the first half of 2010 compared to last.
- According to the Royal Bank of Scotland, we are now in the second phase of the mining cycle with sideways movement and volatility becoming the trend.
- Bloomberg surveyed 29 analysts about expected gold price highs in 2011; the median price for the survey was $1,500.
- Gold held by ETFs in India, the world’s largest buyer of bullion, may surge as much as 17 times in the next three years as investors seek refuge from financial turmoil and inflation.
- Ernst and Young forecasts that the value of deals in the global mining and metals sector is set to soar as competition to secure raw materials heats up.
- Nouriel Roubini recently said, “If there was a double-dip recession, increasing risk aversion, some assets are going to be preferred, and gold will be one of them. But in that situation, things like the dollar, the yen, the Swiss franc have more upside in a situation of rising risk aversion because they are much more liquid than the gold market.” A counterpoint to Mr. Roubini’s thought: what is the currency of failed policies worth after such a massively failed stimulus effort?
- The National Union of Mineworkers is meeting to decide whether to expand its strikes to all operations of multiple diversified miners in South Africa.
Tags: Acquisition Activity, Bank Of Scotland, Dollar Index, ETF, ETFs, Gold, Gold Bullion, Gold Discovery, Gold Equities, Gold Market, Gold Price, Gold Production, Gold Stock, gold stocks, Gold Trade, Grade Gold, Hostile Bid, India, Market Diary, oil, Philadelphia Gold, Precious Minerals, Return On Capital, Royal Bank Of Scotland, Silver, Silver Index, Spot Gold
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