By Kishori Krishnan
History does repeat itself. Going by the historic pattern of the gold market in the â€˜70s, gold is set to experience an upward resistance for 19 months after its recent peak. Gold’s recent peak was $1,014 in March ‘08, roughly 17 months ago.
If this bull market parallels the last one, as it has been doing, then gold should renew its upward momentum in a very serious way starting in October 2009. Traders and analysts predict that the next leg up should be a major one (the biggest gains came during the second rally in gold’s bull market in the â€˜70s).
History tells us this is precisely the move we should expect: gold should begin its second and largest leg up in September or October 2009. Investors should watch the gold chart closely over the next month or so. If gold makes a move above $980, it is time to add to your current position. If it clears $1,000, hold on tight, cause the next leg up in this secular bull market has just begun.
Gold edges up
In Tokyo, gold edged higher above $940 an ounce on Thursday, underpinned by light physical buying as investors eyed the currency market for clues on the precious metal’s direction. Doubts about a nascent global economic recovery had recently prompted investors to sell riskier assets and pile into safe-haven bets including the dollar and U.S. Treasuries.
But a fall in the dollar this week fuelled investors’ tolerance for such riskier assets as stocks and commodities. Spot gold stood at $943.40 an ounce, up 0.2 per cent from New York’s notional close of $941.55. It hit a near three-week low below $930 per ounce on Monday.
Some traders said gold prices could face short-term resistance around $950 per ounce. Some even said a decisive fall below $940 could trigger a rush of fund liquidation. “A pile of long positions held by funds means a drop below $940 would quickly widen the downside risk,” said a manager at a Japanese trading firm.
Juniors fired up
Junior producers are showing signs of shaking off some of their gold dust. Some companies with their rating scores have been shown here. A rating of 1.0 and above indicates Buy, while 2.0 rating and above indicates Buy/Hold. A 3.0 rating and above indicates Hold.
High rater, Gabriel Resources Ltd (GBU), with a market cap of $478 million and a 3.6 rating, was trading at C$1.45. Gabriel has spent a total of $18.5 million on development projects during 2Q increasing the year-to-date amount to $34.8 million. The company remains well-financed with cash, cash equivalents and short term investments at $142.8 million as of June 30, 2009.
The estimated cost to complete the development of its Rosia Montana Project - including interest, financing and corporate costs - is US$1 billion, consisting of capital costs of US$876 million and interest, financing and corporate costs of US$124 million. Once completed, the project is expected to produce approximately 626,000 ounces of gold annually.
High River Gold Mine Ltd (HRG), with a market cap of $211 million, and a 3.5 rating, reported a net loss of C$37.8 million or C$0.06 per share for the second quarter, compared to a net loss of C$4.7 million or C$0.01 per share in the prior year quarter. Total revenue for the quarter increased to C$88.2 million from C$43.5 million in the previous year quarter. The stock was trading at C$0.33.
International Minerals Corp (IMZ), with a market cap of $300 million and a 3.0 rating, was trading at $3.45. The stock is to be included in the Swiss Performance Index.
Jinshan Gold Mines Inc (JIN) with a market cap of $204 million and a 3.0 rating, was trading at C$1.26. Banro Corp (BAA), which has a market cap of $221 million and a 3.0 rating was trading at $2.05. The Canada-based gold exploration and development company has entered into an agreement to acquire a refurbished gold processing plant, which will be transported from Australia to the Twangiza project site in Congo, where it will be erected and commissioned over the next 24 months. The total cost of purchasing and delivering the plant to Twangiza is expected to be less than $15 million. The transaction is expected to close on or about September 21, 2009.
Seabridge Gold Inc (SA) with a market cap of $1,065 million, has received a 1.5 rating and was trading at $28.05. Its second-quarter net loss narrowed to C$1.27 million from C$1.30 million in the prior year period. Loss per share for the quarter remained flat at C$0.03. Net loss for the six months ended June 30, 3009, widened to C$2 .27 million from C$2.21 million in the year-ago period. Loss per share for the period remained flat at C$0.06.
Anatolia Minerals (ANO) with a market cap of $284 has a rating of 1.8. The stock was trading at $2.37. Canadian mining company Anatolia Minerals Development Ltd (ANO.TO) said a unit of Turkey’s Calik Holding will acquire up to a 20 per cent stake in its Copler gold project. In a statement on Thursday, Anatolia said Calik Maden Isletmeleri, a unit of unlisted Calik Holding, will initially buy a 5 per cent stake in Copler for $12.6 million, to be paid over the next 12 months.
Anatolia will grant Calik Mining an option, until December 31, 2011, to acquire up to an additional 15 per cent interest in Copler for $37.8 million. Anatolia is currently developing the oxide phase of Copler and expects initial production in 2010. Shares were down at C$2.90 on Wednesday.
Canplats Resources Corp (CPQ) with a market cap of $106 million and a 1.5 rating, was trading at C$ 2.01 as of August 14, as was Exeter Resources Corp (XRA) with a market cap of $172 million and 1.7 rating, and was trading at C$3.00, on August 14.
The yellow metal is turning out to be a major investment avenue for Indian investors. Despite high local prices, dollar volatility and fall in general demand for jewellery, retail investment demand for gold has taken a sharp upswing of 515.8 per cent to 109 tonnes in the second quarter (April-June) of calendar 2009 from 17.7 tonnes in the first quarter.
Retail investment demand in India - the leading bullion market in the world - returned to positive levels from the dishoarding seen during the first quarter, but was nevertheless weak in comparison to the year-earlier totals. Demand for bars and coins at 21.0 tonnes was less than half the 48.1 tonnes recorded in Q2′08.
Experts said despite the recent near record rupee prices, investor appetite and consumer affinity for gold remains healthy. “While the most recent quarter-on quarter improvement was in large part a seasonal improvement, we expect a healthy rebound in activity. A stronger economic outlook than many regions, and the forthcoming festival season suggest that demand for gold will continue to build on recent trends. We expect consumers, investors and the trade to look for opportunities to buy following an exceptional period of profit-taking and de-stocking,” said Aram Shishmanian, chief executive officer of the World Gold Council.