Gold dropped in Asia on Wednesday, as a rally in the dollar continued for a third day, reducing the appeal of the precious metal as an alternative investment. “The dollar’s rebound has kept gold from gaining further,” Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd. said.
Gold for immediate delivery fell as much as 0.4 per cent to $947.92 an ounce and traded at $949.92, extending Tuesday’s 0.7 per cent loss. Gold for June delivery lost 0.4 per cent to $949.70 an ounce on the New York Mercantile Exchange’s Comex division.
Still, confidence among U.S. consumers jumped in May by the most in six years, fuelling speculation the economy would recover later this year and accelerate inflation. Concerns about inflation have prompted investors to buy gold as a hedge, adding pressure to supply, said Jonathan Barratt, managing director at Commodity Broking Services in Sydney.
“I think the producers have actually been caught short by it,” Barratt told Reuters. “Having looked at what’s happening with the consumer confidence in the U.S., we are seeing very positive signs of a recovery,” he added.
Among other precious metals for immediate delivery, silverÂ dropped 0.5 per cent to $14.54 an ounce and platinumÂ was little changed at $1,136.50 an ounce, while palladiumÂ fell 0.2 per cent to $231, in Singapore.
Gold continues to shine
Gold is the one commodity that has maintained its value even in the face of lower global economic activity. A study released by Ernst and Young has indicated that a number of Canadian mining companies - even those in the gold sector - are placing their exploration activity on hold as a way to conserve cash.
These firms are also holding onto their existing mineral rights and waiting for a demand recovery before starting their search again, said Tom Whelan, the leader of Ernst & Young’s mining and metals practice.
“What we’re seeing now in these three camps is an overall unwillingness to take on additional risk. This makes immediate sense, of course, but there’s another side to the story, which is the predicted and inevitable scramble for scarce resources when the global economy recovers,” he said.
Meanwhile, U.S. gold miner Gold Reserve Inc. said Tuesday it might take President Hugo Chavez’s government to international arbitration if a friendly agreement cannot be reached over its Venezuelan gold concession. The company has been waiting since last May for a permit to begin construction on its Brisas gold project in southern Bolivar state.
The future of Gold Reserve’s Brisas del Cuyuni concession, part of the company’s larger Brisas Project, has become increasingly doubtful as Chavez’s government announces plans to expand control over Venezuela’s gold resources.
Â ”It is Gold Reserve’s intention to settle this dispute amicably,” company president Doug Belanger said in a statement. “But if that is not possible and the company is compelled to file for international arbitration, we would make a claim for the fair market value of our investment … which we believe was in excess of $5 billion.”
In the meantime, investors are cashing in on Claymore gold. Claymore Investments Inc. has raised $400-million for its new gold bullion fund - an amount that could swell to $460-million, making it the largest structured product offering and one of the largest initial public offerings in at least two years.
The fund, which includes a number of novel features, including a hedge against the U. S. dollar, capitalizes on seemingly unquenchable thirst for the metal amid growing concern over inflation and the outlook for the greenback.
It has an over-allotment option of 15 per cent, which would take the fund to $460-million if it is oversubscribed.
Golden Band Resources Inc. (CVE:GBN) has announced an updated NI 43-101 mineral resource estimate for the Bingo gold deposit. Gold resources (capped) now total 73,777 ounces in the measured and indicated category and 67,756 ounces in the inferred category. These figures represent an 18 per cent increase in the measured and indicated resource and a 368 per cent increase in the inferred resource since the previous resource estimate of November 5, 2008.
Bingo is a high-grade quartz vein-hosted gold deposit located at the southern end of Golden Band’s land package in northern Saskatchewan, and is 45 kilometres southwest of the company’s Jolu gold mill.
Linear Gold Corp. (TSX:LRR), a junior Halifax-based mineral developer, has said it has signed a definitive purchase and sale deal with GLR Resources Inc. to acquire a 100 per cent interest in the Goldfields project near Uranium City, Sask.Under the deal, announced Tuesday, Linear will pay GLR US$5 million in cash and issue 727,273 Linear shares with a deemed value of C$800,000.
Linear shares were halted on the TSX pending news.
The deal comes two weeks after Linear asked the Nova Scotia Supreme Court for a ruling to stop GLR from selling the Saskatchewan project to another bidder. GLR and Linear had signed a binding term sheet on the gold development in April.
In addition to the cash and shares Linear will pay for Goldfields, the Halifax company said it will also reimburse GLR about US$3 million and C$1.2 million for deposits made on equipment contracts.
“The Goldfields project represents an exciting acquisition and an ideal initial development project for Linear,” Wade Dawe, president and CEO of Linear, said in a release, adding: “We are confident that based on current gold prices, the economics and overall value of this project is substantially higher than the already robust results returned in the 2007 feasibility study, using gold prices that were capped at approximately US$600 per ounce.”