Good Day,

A second day of price pullbacks brought gold to a low of $982 earlier this morning and the metals' movements were seen closely tracking developments in the dollar and to a lesser extent, oil. A better than expected picture on the US unemployment front helped the dollar reclaim the 77-mark on the trade weighted index.

In other US economic news, home foreclosures fell, giving a boost to hopes that yet another corner may have been turned. Sadly, however, another number that came to light today was the one that shows the poverty level in the US rising to an 11-year high. Everything has a price. It's just that some things have different 'costs' attached to them...

Analysts say however, that the climb out of the dark pit could quickly turn into a slip-back without additional aid to individual states and the ranks of the unemployed. There are now roughly six applicants clamoring for every open US position. On the global scene, Canada and England both chimed in with...no rate changes today. To no one's surprise.

Later in the trading session, a sharp rise in the US trade gap -created by rising oil prices and a flood of imported autos intended for the cash-for-clunkers campaign- undermined the greenback's progress and brought it back nearer the aforementioned number. Bullion thus recovered and turned back towards the pivotal $990 level as the morning wore on.

Spot gold bullion was last seen trading at $992.00 per ounce - a minor, 40-cent loss on the day, amid mixed conditions in the currency and energy markets. Fresh news of the type that could move the market were largely absent following the two key statistics mentioned above.

Further attempts to get back to levels above the four-digit mark are still seen as plausible before the week comes to an end, despite continuing overbought conditions and a virtual absence of dissent among commentators regarding the metal's price prospects - near, and not so near-term. A chorus of harmonies is being heard still, and the notes sounded out are $1100, $1200, $1300, and on up - to $1600. Something that might however possibly prevent this month from being the September to remember -at least in the opinion of one industry insider, is -once again- India.

While September has traditionally been a poor month for equity markets, it is not the case for gold as the recent surge past US$1,000 an ounce reached earlier this week attests. Interestingly enough, one of the biggest factors in the bullion market may be India.

Typically, September is the strongest buying month for the Indian wedding and festival season, a note from the mining team at Canaccord Adams said Wednesday. Indian weddings typically occur between late September and March, and jewellers will also buy gold for the Hindu festival of Diwali, the Festival of Light, which falls in October, November or December.

However, there are some factors in the country this year that could put downward pressure on the market.For one, the rupee has depreciated almost 10% compared with the greenback in the past year, and with gold's asking price rising 14% in the same period this translates to a 26.5% jump in price for Indian consumers.

This price increase could exclude some price-conscious Indian consumers from the bullion market this year, the note said. As well, India is experiencing one of lightest monsoon seasons in years, down 29% between June and August.

Monsoons typically account for 80% of the country's rainfall, and with farming accounting for 18% of India's GDP and employing 60% of the population, a poor crop can curtail spending to a large degree. In 2002, when India's monsoons fell only 19%, the country's GDP slowed to 3.8% from 5.8%, so the impact of 2009's dry monsoon season could well be even more significant.

Silver prices were trading at $16.45 per ounce, sporting a 15-cent gain for the morning, while platinum advanced $1 to $1278 and palladium fell by the same amount to $290 per ounce. Analysts at UBS recommended pulling the profit levers in silver, following its 17% gain recorded over the past three weeks. The risk of an 'idiosyncratic collapse' in the metal was cited as having risen.

On the other hand, analysts at Citigroup opined that silver, along with platinum and palladium, will continue to outperform gold, should the economic recovery exhibit more and more mature shoots of a darker shade of green. The current gold/silver ratio has narrowed to near 60:1 following the sharp rally in the white metal.

We've all heard by now that guns and gold go hand-in-hand. We cannot verify this allegation on your behalf just now, nor do we suspect (at least we hope not) that it is entirely well-founded. However, there is at least one place in this world where gold may well have to not only be dug up under armed protection, but where a whole slew of weapons may be aimed at each other as part of the background conditions. Grab your pick and shovel - and don't forget that AK-47. Welcome to the last gold frontier.

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Bloomberg reports on this not-for-the-squeamish topic:

AngloGold Ashanti Ltd. and Randgold Resources Ltd. are pushing into one of the world's poorest and most unstable countries to boost reserves as the metal trades close to a record and global reserves dwindle.

The two companies are buying control of a deposit in the Democratic Republic of Congo containing as much as $22 billion of gold at current prices. The project is in an area increasingly torn by fighting between the government and Ugandan rebel group the Lord's Resistance Army.

The move puts AngloGold and Randgold at the vanguard of miners moving into risky areas like Congo, which has been beset by more than a decade of violence that left 5 million dead. Gold output in countries such as South Africa has dropped, and the price has risen for eight straight years, making Congo's untapped reserves look more attractive.

If you want to retain your position then you've got to look at places like the Congo, because that's where the very richest deposits are, said John McGloin, a mining analyst at Arbuthnot Securities Ltd. in London who has a buy rating on Randgold. While it might be highly enticing, it doesn't come without baggage.

The Lord's Resistance Army made an unprecedented 55 attacks in July in the Faradje area, about 90 kilometers (56 miles) north of Moto, and drove 125,000 people from their homes in Haut-Uele in August, the United Nations Refugee Agency said. It killed 1,273 people and abducted 655 children and 1,427 adults in the past year in Orientale. More than 540,000 people have been displaced in the province. In January, 100 civilians were massacred in the gold-mining town of Tora, 65 kilometers from Moto, according to the UN.

Moto Goldmines delayed restarting operations after the Christmas holidays because the rebels looted nearby villages. The company reinforced security measures at all levels and operations were held back earlier in the year because of rebel attacks about 50 kilometers to 100 kilometers from the site, General Manager Louis Watum said. There is some uncertainty, that's true, but it's better than it was, he said.

 

Mark Bristow, chief executive officer of Jersey, Channel Islands-based Randgold, said he's relying on the governments of Congo and Uganda to curb the violence to protect the investment that the mine will bring. The company also has mines in Mali and is developing projects in Senegal and Ivory Coast. We're an African business, Bristow said in a London interview. We make it our business to know how to work there.

AngloGold, the continent's biggest gold producer, withdrew workers from some of its Congo exploration camps in November because of fighting between government forces and rebels in Orientale. Johannesburg-based AngloGold considers Congo to have become more stable since then, company spokesman Alan Fine said.

Central Africa is one of the last gold frontiers to exploit, said Mark Smith, an analyst at GMP Securities in London.

A dangerous frontier, to be sure.

American Indians once said that gold is the yellow metal that makes the White man crazy

Jon Nadler

Senior Analyst

 

Kitco Metals Inc.

North America