By Kishori Krishnan Exclusive To Gold Investing News
There are some strong headwinds, but bankers and investment houses are still bullish on the yellow metal. Gold is consolidating and prices may decline further in the near term before heading higher, analysts state. ScotiaMocatta insists the “big picture remains supportive for gold. Although gold is facing some headwinds, the overall financial environment remains bullish for gold.”
In their recently published Metals Matters, ScotiaMocatta has noted that IMF gold sales are now all but inevitable, as a result of a recently enacted bill that will allow the IMF to sell 403 tonnes of gold to increase its finances. The market expects the sales to be conducted under the umbrella of a Central Bank Gold Agreement (CBGA), ScotiaMocatta said.
“Although some of the IMF gold might be sold off market to the likes of China, the majority is likely to be sold in the market,” Scotia’s analysts have predicted. “If for some reason another CBGA does not come about, then the market may get a bit more nervous about the IMF’s selling; but it is difficult to envisage the gold being sold in anything other than a controlled manner.”
The analyst group has said silver continues to outperform gold, both on the upside and now on the downside. “The pullback in silver prices is looking a bit more than just a correction and the break of the uptrend line bodes ill and may well prompt further liquidation,” the analysts have cautioned.
“However, our medium and long term view for silver is bullish and we would view this sell-off as providing a better medium term buying opportunity,” they advised. “If, as we suspect, the bear market rally in industrial metals and equities peters out then after a period of across the board selling (which may initially weaken silver further), we would look for silver to attract safe-haven buying,” they added.
Adding to the tenor is a note by Citigroup which has clearly spelt out that silver investment will outshine gold. Silver may not be as hot as gold as far as global investments are concerned, but silver continues to grip the investment sentiments of bullion traders and dealers across the world.
The global bank said on Thursdsay that investment flows into gold are moderating while the outlook for silver is improving. The ratio for gold-to-silver prices should return to its historical norm between 55 and 60 from the current 69, it said.
Silver has outperformed gold. While the precious metal remains 35 per cent below its March 2008 high of $21.44 per ounce, its up 24 per cent compared to only 5.3 perc ent for gold. So far this month, the spot price of silver has risen 14 per cent. On February 24 2009, the aggregate trading in silver futures reached a high of over 81,900 contracts.
Gold Fields, the world’s No. 4 gold producer, has said it expects output for the fourth quarter to end-June to rise by 4 per cent to 905,000 ounces, exceeding an earlier forecast of a 3 per cent rise. The company said improved safety performance and ramp-up of its South African mines had led to the increase in production, but total cash costs and expenditure were seen rising slightly, due to a stronger rand versus the U.S. dollar.
Queenston Mining (TSX: T.QMI) shares moved up as much as 11 per cent to $4.50 on Thursday after the miner reported results from the 20,000 metre drilling program in progress at its 100 per cent owned Upper Beaver property in Kirkland Lake, Ontario, which included 9.4 grams per tonne (g/t) gold with 0.6 per cent copper over 37.3 metres.
Queenston is a past producing mining company with a 2.7 million ounce combined historic and recently defined NI 43-101 compliant gold resources. Its property portfolio in Kirkland Lake includes 17 properties covering 14,000 hectares, making it the largest mineral claim holder in the camp.
Almost 90 per cent of the holdings are owned 100 per cent, and there are five joint venture properties with Kirkland Lake Gold (KGLIF.PK). Its six deposits cover some 900 hectares and have produced over 3.4 million ounces of gold historically. Besides these assets, the company has a 50-50 joint venture with Globex Mining Enterprises (GLBXF.PK) on the Wood-Pandora project in the Cadillac Township of Quebec.
Just as in the Klondike Days, the search for gold remains fiercely competitive, with more and more companies announcing new finds and getting their names out there. Asia-based, but Vancouver-headquartered East Asia Minerals Corp. (TSX: V.EAS), which had closed a private placement of $4.641 million in June, told the small cap financial world about what it had turned up in Indonesia’s Sumatra province.
East Asia announced that ongoing exploration of its South Miwah Bluff Gold Zone has come out with high-grade gold. The company also announced that drilling is underway to test the full strike length of the main Miwah Gold Zone, having commenced at the western extreme.
Results have been received for 154 rock sawn channel samples from South Miwah Bluff, and include 83.59 g/t gold over 24 metres, 20.14 g/t gold over 12 metres, and 9.21 g/t gold over seven metres. Detailed follow-up is ongoing to the north and south along strike of the high-grade exposure where several gold-rich channels including 125.9 g/t gold over 23 metres and 19.15 g/t gold over eight metres were recently discovered by EAS.
EAS has gold and copper exploration properties in Indonesia, and uranium exploration properties in Mongolia. In Indonesia, the company has a 70 per cent to 85 per cent interest in half a dozen gold-copper properties, and in Mongolia, it owns 12 uranium properties, four phosphate properties, and a 75 per cent interest in a copper oxide property.
Then there is Kirkland Lake Gold Inc which dropped marginally to touch $7.99, and Globex Mining Enterprise (GMX) and Aurelian Resources (TSX:T.ARU) and Guyana Goldfields (TSX:T.GUY), which have all taken the fancy of investors.