By Kishori Krishnan
Goldman’s gold-plated earnings set the score. Citigroup and Bank of America joined Goldman Sachs and J.P.Morgan in reporting better-than-forecast earnings for the second quarter of 2009. A fact that buoyed the market and the price of gold.
Next week, the main event is slated to be the Federal Reserve chairman Ben Bernanke’s testimony to the Senate about “how and when” he’ll move to reduce the liquidity pumped into the financial system since the crisis began two years ago in August. A major factor that will cite support for gold prices at $920 - and pegging resistance at $944, state analysts.
“All indications are that deflation has been successfully fended off, so far, at least,” says the Curious Capitalist blog at Time magazine after Thursday’s strong US consumer-price data. “The weakening US Dollar from 2002-2008 led to higher global liquidity and higher asset prices like stocks,” says Steven Barrow at Standard Bank in London. “This came to a crashing end in mid 2008 but there are signs that it could be building up again. Add this to the growing evidence that US investors are sending more money into foreign markets again and it looks as if this association between stronger stocks and a weaker dollar could have further to run,” he added.
On Friday, gold price slipped into the New York opening, dropping $2 from a London AM Fix of $934.50 an ounce, as global stock markets ticked higher for the fourth session this week. Crude oil held onto Thursday’s bounce above $62 per barrel. US government debt prices rose, pushing the yield on 10-year Treasuries down to 3.45 per cent.
A new Scotia Capital note says that gold is set to jump in the coming months. While gold and silver prices have not seen their annual summer pullback this year, they have remained `stagnant’ and are likely to stay flat until August, argue other analysts.
“With a small increase in investor and physical fabrication demand, prices will move much higher during the seasonal rallies of August-September and November-February,” David Christie, geology analyst, said in a note to clients. “We believe that over the next month investors should move to overweight gold and silver equities in anticipation of higher commodity prices,” he added. “As we move deeper in 2009, we believe that investment demand will continue to be the driving force for gold demand, especially in the West,” he said.
Meanwhile, Scotia Capital has downgraded Kinross Gold Corp. (K:TSX) to “sector perform” due to market price appreciation, while upgrading Pan American Silver Corp. (PAA:TSX) to “sector perform.” Minefinders Corporation Ltd. (MFL:TSX) has also been upgraded to “sector outperform” due to the rising prices.
In Asia and London, the price of gold reversed slight losses, rising to see a slight gain at $939.85 at the start of New York trade. Gold price then fell to see a $6.75 loss at $932.65, but it rallied back into the close and ended with a loss of just 0.4 per cent. The gold price in Euros fell to â‚¬ 663.
“It’s increasingly turning difficult for gold to break and hold above $942 to $945 an ounce,” Pradeep Unni, a Richcomm Global Services analyst in Dubai, said today in a report. “The metal may drop back to at least $927 to $930 an ounce,” he said, citing “short-term intraday charts.”
Crude-oil futures, used by some investors as an indicator of the outlook for inflation, fell as much as 0.8 per cent to $61.50 a barrel in New York. Oil has gained 3.1 per cent this week as the dollar index has lost 1 per cent.
Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose 0.3 metric ton to 1,094.85 tons. That’s the first increase since the fund reached a record 1,134.03 tons almost seven weeks ago. Gold held in ETF Securities Ltd.’s exchange-traded commodities fell 0.5 per cent to 7.533 million ounces.
NovaGold Resources Inc. (TSX:NG) has credited greatly reduced spending on exploration activities and a stronger loonie for paring its second-quarter losses by about 80 per cent as compared with the year-earlier period. he Vancouver-based miner put its net loss at $4.8 million or three cents a share for the three months ended May 31, compared with a net loss of $23.2 million or 22 cents for the corresponding period in 2008.
Exploration expenses were a greatly reduced $4.4 million as the company focused exploration efforts mainly on its Donlin Creek project in Alaska, a 50-50 partnership with Barrick Gold (TXS:ABX).
That compared with $16.9 million in the second quarter last year related to exploration activities at Donlin Creek, as well as its idled Galore Creek partnership in British Columbia with Teck Cominco (TSX:TCKB.), and the similarly idled Rock Creek project in Alaska.
It also enjoyed a $16.10-million foreign exchange gain in the second quarter of 2009 compared with a loss of $700,000 in the same 2008 period, due primarily to the effect of the stronger Canadian dollar against its U.S.-dollar denominated liabilities.
A $4.2-million increase in non-cash stock-based compensation offset the bottom-line improvements. NovaGold says it had cash and cash equivalents of $56.1 million and working capital of $48.9 million on hand at the end of May, compared with cash and equivalents of $12.2 million and a working capital deficiency of $20.2 million at the end of November.
The company raised US$75 million in January through an issue of shares and warrants and has also converted a US$20-million bridge loan into shares and warrants for net proceeds of $2.5 million. Holdings in Vancouver-based Alexco Resources Corp. (TSX:AXR) were sold for net proceeds of $3.8 million.
Northgate Minerals Corporation has announced positive results from the pre-feasibility study regarding its plan to re-open the Young-Davidson Mine in Matachewan. The company hopes to begin construction on the site next year with a goal to being gold production in 2012.
The pre-feasibility incorporates the measured and indicated gold resource of 3.3 million ounces that was announced in December 2008. There are proven and probable reserves of 2.8 million ounces contained gold, 15-year mine-life at a mill throughput of 6,000 tonnes per day and average annual production of over 170,000 ounces of gold at a net cash cost of $333 per ounce.
Alexis Minerals Corporation (TSX:AMC) has announced positive results from the pre-feasibility study on the Lac Pelletier Gold Project in Rouyn Noranda, Quebec. The study estimates that the Lac Pelletier Mine offers a 155 per cent internal rate of return (IRR) and generates over CDN $20.7 million free cash flow on production of approximately 118,100 ounces (109,300 ounces recovered) ounces of gold (oz.Au) over an estimated three year project life.
Lac Pelletier offered Alexis an opportunity to bring a second satellite mine operation into production to complement cash flow earned from the Alexis Lac Herbin mine in Val d’Or, Quebec. The company’s total annual gold production would increase in 2010 to annual levels of between 75,000 and 85,000 oz.Au per year with both mines in production.