Gold climbed for the first time in three sessions on surging demand for the metal as a store of value while the dollar fell and investors prepared for the release later this week of US bank stress tests.
The tests may signal whether 19 top financial firms need more capital to withstand economic disruptions. The Federal Reserve plans to make the data public on May 7, the same day as a possible interest-rate move by the European Central Bank. Some investors buy precious metals as a haven from economic turmoil. The dollar slid as much as 1.2 per cent against the euro.
“This week’s ECB interest-rate decision and U.S. bank stress-test results will dominate the action in the gold price,” said Bayram Dincer, a Dresdner Bank commodity analyst in Zurich told Bloomberg. “Gold will retest $US910 an ounce resistance and surpass it. Gold fundamentals are still well intact and are expected to become more price-supportive in the near term.”
Gold futures for June delivery jumped $US14, or 1.6 per cent, to $US902.20 an ounce on the Comex division of the New York Mercantile Exchange. That’s the biggest gain for a most-active contract since April 23. The price fell 2.8 per cent last week, the most since the first week in April.
“Gold can go to $US1500 an ounce in the next two to three years,” Aaron Smith, a managing director at Superfund Financial Singapore, said today in a Bloomberg Television interview. “Much of that is based on the erosion of the value of the dollar because of the increasing money supply.”
Gold rose nearly 1 per cent on Monday on a weaker U.S. dollar and buying from jewelers in the Asian market, where consumers have taken a shine to the yellow metal. Gold Fields Ltd. (GFI SJ), Africa’s second-largest gold producer, snapped a three-day decline, gaining 3.35 rand, or 3.8 per cent. Larger rival AngloGold Ashanti Ltd. (ANG SJ) rose 3.20 rand, or 1.2 per cent.
Gold was almost 3 per cent below a near four-week high of $918.25 struck last Monday, which also offered incentives for buyers in main consumer India to stock up. While gold bars fetched 50 cents premiums in Singapore, consumers in India continued to buy, despite the high gold price. India’s wedding season lasts until June and with fears that prices could skyrocket, most families are buying gold despite its current price tag. Indonesia also snapped up gold, while premiums in Hong Kong were steady. In April, gold fell 3.5 per cent as signs of economic recovery boosted risk appetite and dented safe-haven demand.
“As of now demand is good as the trade is buying. Gold dealers who had sold on a certain gold festival day - Akshaya Tritiya, are restocking and the prices are supportive too,” said Samir Shah, vice president for business development at Riddisiddhi Bullions Ltd in Mumbai. “The rupee against the dollar has also been in favor of the buyers,” said Shah, referring to a firm Indian currency.
RSBL Spot (Spot Precious-metals Online Trading), the electronic over-the-Counter (OTC) bullion trading platform in one of the India’s largest bullion trading companies RiddiSiddhi Bullions Limited, recorded a trade volume of 565.200 kgs in gold and 3000 kg in silver on April 30, 2009, valued at Rs 87 crore.
“We have been seeing good inquiries on the physical side. India continues to buy, and we have seen purchases in early trade. They are buying at current levels,” said a dealer in Singapore. “I think there’s selling pressure for gold at around $900,” added another dealer. India imported around 30 metric tons of gold in April, up 25 per cent. The world’s largest consumer of gold imported negligible volumes of gold in February and March due to high prices, Bombay Bullion Association President Suresh Hundia told the Dow Jones Newswires. Last April, it imported 24 tons.
A disappointed former Regis Resources director has lashed out at Newmont Mining Ltd after the world’s largest gold producer helped rebel shareholders oust the junior explorer’s board. At a meeting in Melbourne on Monday three of a group of dissident shareholders were voted onto the minerals explorer’s board with overwhelming support. The rebel shareholders took action because they said the former Regis board of three was taking too long to develop the Duketon gold project in Western Australia. The rebel shareholders have said that since Mr Walker became Regis chief executive, the company had significantly underperformed the sharemarket’s All Ordinaries Index, the ASX Gold Index and gold price.
Newmont Mining President and CEO Richard O’Brien has said that the company has noted a decoupling of the traditional relationship between the weak U.S. dollar and gold prices. However, O’Brien expects them to re-couple in the near future, bringing the inflation risks that will continue to prompt investors to invest in gold. In fact, investment demand continues to support gold prices despite other factors, he noted.
Despite a nearly 50 per cent decline in net income, Newmont is maintaining its outlook this year for equity gold sales and costs per ounce. O’Brien said the company will maintain its 2009 outlook for equity gold sales of 5.2 million pounds and 5.5 million pounds and cost applicable to sales of $210 to $230 per ounce. O’Brien added: “Completing our Boddington project by mid-year and successfully ramping up to commercial production is a clear driver of 2009 performance.”
Adjusted net income for the first quarter of this year was reported at $208 million or 44-cents per sale, down from the $381 million (85-cents/sh) reporting during the same quarter a year ago. “Lower commodity prices relative to last year both hurt and helped our performance in the first quarter,” O’Brien said. “Lower copper prices, in particular, negatively impacted our earnings and cash flow. On the positive side, lower than expected diesel costs and Australian dollar exchange rates resulted in lower than expected operating costs.”
Premier Gold Mines (TSX:PG) has said its Phase I drill campaign at the company’s 100 per cent-owned PQ-North Project in Northwestern Ontario, has resulted in the discovery of two potentially significant gold-bearing horizons. Phase I drilling, testing only one of the four main targets on the property, was primarily aimed at confirming historic geological information. To accommodate the significant early success of this exploration program, Premier has expanded the PQ North budget to utilize two diamond drill rigs throughout the summer season.
The new intercepts are hosted within discreet biotite-garnet altered zones consisting of folded and laminated iron formation containing pyrite, pyrrhotite, chalcopyrite and rare visible gold. “Premier’s exploration program marks the first concerted effort to define new gold-bearing structures in this part of the camp and our early discoveries are located immediately along strike from the main ore-bearing host rock at Goldcorp’s adjacent Musselwhite Gold Mine” stated Stephen McGibbon, executive vice-president and chief operating officer of Premier.