A slight drop in prices is a good time to shore up. Last Friday, gold futures surged above $1,000, the highest level since last March. This week though, gold slipped back. But worries about long-term inflation caused by the massive U.S. stimulus package may push it up again, state analysts.
Gold fell for a third straight day after US policy makers reassured investors that the economy would recover from the recession. “People have been buying gold on economic Armageddon, so to see Obama and Bernanke paint a rosier picture, I’m not surprised to see gold come down a little bit,” said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago.
Gold futures for April delivery fell $3.30, or 0.3 per cent, to $966.20 an ounce on the Comex division of the New York Mercantile Exchange. The price has declined 3.6 per cent in the past three days after pushing past $1,000 to the highest since March on February 20.
Gold turned corrective on Wednesday, reportedly knocked off its recent 11-month highs by aggressive fund selling in gold futures contracts. This selling was said by some to be related to options expiration. Not to forget, the rather strong up-move we saw in gold last week, culminating in a push back above the $1,000 psychological barrier, returned considerable credence to the long-term uptrend. Despite this week’s corrective tone, a retest of the all-time high at $1032.20 is still considered likely, analysts maintain.
The yellow metal has gained 9.6 per cent this year. A slight drop in prices may encourage investors seeking a haven from financial turmoil to buy precious metals, said Tom Pawlicki, an analyst at MF Global Ltd. Gold rose 6.4 per cent last week as the Standard & Poor’s 500 Index fell 6.9 per cent.Â “Gold and other precious metals should continue to receive inflows of investment due to their ongoing out performance of other asset classes,” Pawlicki said. “Support will continue to come from disappointment in efforts to stem the financial crisis, and the weakness in the stock market that has resulted.”
As if on cue, a new report suggests that mergers and acquisitions (M&A) activity in the gold sector is likely to further increase this year, spurred on by the rising value of gold bullion, and providing a stream of potential mandates for bankers in the sector. Genuity Capital Markets analysts Tony Lesiak, Christine Healy and Michael Gray have noted that 2009 could be a big year for gold M&A for a number of reasons: rising bullion prices, the growing valuation disconnect between juniors and seniors, recent financings by the seniors, and a shortage of internal growth projects for the seniors.
So who could get bought? The analysts have ranked 10 junior gold producers and 20 junior development companies on the unusual measure of estimated total acquisition cost per attributable, recoverable ounce. The most likely North American buyers in this market, they wrote in a note to their clients, include Barrick Gold Corp.(TSX: ABX), Kinross Gold Corp.(YSX:K), Eldorado Gold Corp. (TSX:ELD), and Alamos Gold Inc. (TSX:AGI). “We recommend a basket approach to investing in any of these names given the speculative and single-asset nature of the companies,” they added.
Store of value
Investors have been buying gold this year as a store of value, driving the price up and investment in the SPDR Gold Trust to a record 1,029 metric tons last week. Sales of 1-ounce American Eagle gold coins more than quadrupled to 92,000 in January, according to the US Mint. Still, a decline in prices may be an opportunity to buy, some investors said.
“Those who’ve not yet bought gold as insurance against economic chaos have their opportunity to do so now and we would strongly urge that,” Dennis Gartman, an economist and editor of the Gartman Letter in Suffolk, Virginia, told his clients.
Osisko Mining Corporation (TSX:OSK) has closed its previously announced public offering, on a bought-deal basis, with a syndicate of underwriters, led by Thomas Weisel Partners Canada Inc. and BMO Nesbitt Burns Inc., and including Dundee Securities Corporation, RBC Dominion Securities Inc., National Bank Financial Inc., Paradigm Capital Inc., Canaccord Capital Corporation, TD Securities Inc. and PI Financial Corp. Osisko issued a total of 88,550,000 units of the Corporation at a price of C$4.55 per Unit, for aggregate gross proceeds of C$402,902,500.
Osisko will use the proceeds of the offering for the development and construction of its Canadian Malartic Project and for working capital purposes. Sean Roosen, CEO of Osisko, stated: “With the closing of this financing we have successfully moved another step closer to our goal of bringing the Canadian Malartic gold deposit into production.”
Australian mining explorer Solomon Gold (SOLG) said it was confident of being able to secure further financing for its exploration projects as it reported a narrowing in first half operating losses. The group, which is searching for gold deposits under an agreement with U.S.-based miner Newmont, said its operating losses for the six-month period ending December 31 totalled 478,000 Australian dollars ($309,800) compared with a 798,000 loss the previous year. “Crisis in the credit markets has spilled over into the equity markets to the extent that raising equity funds for companies at our stage of development has become very difficult,” the group said in its half-yearly statement. In November 2008 Solomon raised 350,000 pounds through a rights issue.
Serengeti Resources Inc. (TSX-V: SIR) has announced the initial mineral resource estimate for the Central Zone at the company’s 100 per cent owned Kwanika copper-gold property in British Columbia.
At a 0.25 per cent copper equivalent (Cu Eq)1 cut-off the Kwanika Central Zone Mineral Resources are: 182.6 million tonnes of indicated mineral resources grading 0.47 per cent Cu Eq or 0.71 g/t Au Eq, containing 1.62 million ounces of gold and 1.15 billion pounds of copper; and 28.5 million tonnes of inferred mineral resources grading 0.32 per cent Cu Eq or 0.49 g/t Au Eq containing an additional 0.2 million ounces of gold and 120 million pounds of copper. A higher grade core within the zone, at a 0.4 per cent Cu Eq cut-off, yields: 75.1 million tonnes of indicated mineral resources grading 0.69 per cent Cu Eq or 1.05 g/t Au Eq, containing 1.02 million ounces of gold and 680 million pounds of copper.Â