By Kishori Krishnan Exclusive To Gold Investing News
Its a gold rush the likes of which the country has not seen in a long time. Dozens of mining companies have recently staked thousands of fresh claims in an area that once teemed with old-time panners and prospectors moiling for gold after digging and finding the the fabled and elusive mother lode.
Exploring for the yellow metal in Dawson, Yukon has rachetted to an all-time high. There are at least 29 junior mining companies active in the area. About 7,900 claims have been staked since late 2006. For most, early drilling results explain the rush.
Many operating mines exploit deposits that yield one gram of gold per tonne of ore. White-Gold area miners report 100-metre stretches of claim that yield three or four times that. Mineral exploration spending in the Yukon has gone from $7 million in 2002 to over $100 million in 2007 and 2008. Even in recessionary 2009, government figures suggest mining companies will spend up to $60 million.
Stocks on the go
Traders and analysts have picked out some of their favourites. A sampling -
Pediment Gold Corp (PEX:TSX) “positive bench sample results.”
Allied Nevada Gold Corp (NYSE:A: ANV) “to raise C$100.4 million in equity financing; still has come legs to run higher.”
Eastmain Resources Inc (TSX:ER) “among the higher quality juniors that should be able to weather the storm.”
Jinshan Gold Mines (TSX:JIN) “share price movement likely.”
Vista Gold Corp (TSX:VGZ) “could soon get permit to move forward on their Paredones Amarillos project.”
Heat is on
The heat is definitely on. The resolve of the US Federal Reserve to keep interest rates near zero added to the temperature with analysts maintaining that it could lead to increased investment in the precious metal.
According to an Investec Bank (Australia) report by Reuters, this could push up the gold price as investors buy into the commodity in order to protect themselves from inflation. Analysts at the bank wrote: “Gold prices were bolstered by the U.S. Federal Reserve, thereby enhancing bullion’s status as a hedge against inflation,” the news provider revealed.
The decline of the dollar, which traditionally has an inverse relationship with gold, could also serve to boost the yellow metal’s appeal, with AngloGold Ashanti (AU) recently revising its gold price expectation on the back of dollar weakness.
“We think it could trade a lot closer to $1,000 next year and it will very much depend on how weak the US currency trades. I think it will be weaker, the real question is how much weaker,” chief executive officer Mark Cutifani commented.
Hedge fund operator John Paulson, who made a killing over the previous two years betting against subprime mortgages and financial stocks, recently raised his stake in the miner.
During the second quarter, Paulson & Co bought 39.9 million American depositary receipts of South African-based AngloGold Ashanti, increasing its stake to 42.86 million shares, or 11.99 per cent. This stake was valued at $1.57 billion as of June 30.
The fund held 2.9 million AngloGold shares valued at $108 million at the end of the first quarter. Ben Silverman, director of research at InsiderScore.com, notes that the hedge fund purchased this initial stake directly from the company.
Paulson has also built up a $2.3 billion holding of Goldfields, Kinross Gold, Market Vectors Gold Miners and Anglo Ashanti. The fact that he is launching a “Paulson Real Estate Recovery Fund”, reversing the bet against sub-prime securities that made him rich, tells us all we need to know about his thinking.
Gold climbed for a third day in Singapore on Friday, and headed for a fifth weekly advance as investors sought an alternative to a weakening dollar and commodities rose on signs of an economic turnaround. Bullion is on course for the longest weekly winning streak since November 2007.
The Dollar Index, a six-currency gauge of the greenback’s value, fell as much as 0.7 per cent yesterday after the German economy, Europe’s largest, unexpectedly expanded in the second quarter. Hong Kong’s economy probably grew 1.2 per cent last quarter from the previous three months, a Bloomberg survey showed.
“Investors are seeking shelter from a weakening dollar,” said Steve Chun, a trader with Hyundai Futures Co. in Seoul. “We expect physical demand for gold to rebound, with some gap of time, as global economies are recovering gradually.”
Gold for immediate delivery rose 0.2 per cent to $956.47 an ounce in Singapore. The metal is up 8.4 per cent this year and 0.2 per cent this week. Crude oil for September delivery rose 0.5 per cent to $70.89 a barrel.
Thirteen of 27 traders, investors and analysts surveyed by Bloomberg News, or 48 per cent, said bullion would gain next week. Six forecast lower prices and eight were neutral.
“There remains the risk of a gold price decline on the back of the liquidation of speculative long positions that are at a high level at present,” Eugen Weinberg and other analysts with Commerzbank AG, wrote in a note yesterday.