By Kishori Krishnan Exclusive To Gold Investing News
Investors are a worried lot these days. Given that inflation is expected to rise due to the large amounts of money being pumped into the global economy by central banks and governments to boost growth and confidence, the worry lines have just got deeper.
The U.S. has committed as much as $9.7 trillion to help ease the recession and solve the banking crisis. For gold, the escalating crisis in the banking sector has pushed up prices by about 40 per cent since late October last year. “It tells you how worried people are about the state of our financial system. When you see gold making new highs in many different currencies, it shows that a lot of people are worried about the printing of money by governments,” said Joseph Foster, portfolio manager of the $550 million Van Eck International Investors Gold Fund in New York.
As investors continue to seek safe-heaven bullion due to further deterioration in the global economy, U.S. gold futures rose above $954, to their highest since late July. The gold contract for April delivery on the COMEX division of the New York Mercantile Exchange had risen $12.3 or 1.3 per cent from Friday’s New York settlement to $954.5 per ounce in after-hours trading.
Last week, bullion gained 3.3 per cent and is up 7 per cent already this year. Bullion has climbed 31 per cent since October as governments are lowering interest rates and spending trillions of dollars to combat recession. London based broker Marex Financial Ltd. said in a report. “Economic stimulus plans by governments around the world are likely to drive inflation, increasing demand for gold as a hedge,” Marex said.
Incidentally, holdings in the SPDR Gold Trust may soon exceed official reserves of Switzerland, the world’s sixth-largest stockpile. Investment in the ETF jumped 12 per cent on demand for the metal as a store of value amid concern over recession. “The popularity of the long-gold view is based on uncertainty among other asset classes and remains a crowded trade,” analysts at Deutsche Bank AG said in a report. “Current support will be found around $930, but $950 could trigger profit-taking.” Gold will average $950 this quarter and $975 in the second quarter, Deutsche Bank said. Futures have averaged $880.87 in 2009. A drop may signal a buying opportunity, some investors said.
Vladimir Titkov, head of investment Banking M&A at Uralsib adds that gold will retain value in tough economic times. “As long as the global financial crisis continues, gold prices will hold, if not rise.”
India’s exports down
India’s gold jewellery exports during the first 10 months of the financial year that began April 1 fell 6.09 per cent in value to $4.29 billion compared with $4.57 billion a year ago, the Gem and Jewellery Export Promotion Council said. Total exports of gems and jewellery fell 2.3 per cent to $16.39 billion from $16.77 billion during the year-ago period, the trade body said. Exports of cut and polished diamonds declined by 2.85 per cent on year to $11.2 billion, the data showed.
In the fiscal year ended March 2008, India’s gold jewellery exports rose 8 per cent to $5.6 billion, with the U.S. accounting for half of it, while exports of gems and jewelry rose 22 per cent to $20.89 billion.
Vantex Resources Ltd. (TSX: VTX) has completed a $140,000 non-brokered financing position. The company will issue 140 units at a price of $1,000 per unit. Each unit includes 16,000 flow through common shares of the company and 4,000 common shares of the company at a price of $0.05 per share. These shares are subject to a 4-month minimum hold period and the financing is subject to the approval of the TSX Venture. In connection with the private placement, a cash commission of $14,000 will be paid out to an arm’s length individual.
Central Rand Gold (LSE: CRG) intends acquiring a 26 per cent stake empowerment shareholder Puno Gold Investments holds in the JSE-listed company’s assets because Puno could not fulfil its obligations thereby ending a long-running dispute. There has been a prolonged disagreement over a shareholders’ agreement between the LSE-listed CRG and Puno. In its 2008 interim financial report, CRG said the partners had been unable to resolve a dispute related to the allocation of inter company loans and the funding of certain costs. Loans to Puno Gold totalled about R53 million at the end of June 2008.
Canada’s Dundee Precious Metals (TSX:DPM) says it is still on track to build a gold/copper smelter at its Chelopech mine in Bulgaria despite the global financial crisis. Alex Nestor, manager of investment projects at Dundee, said the company would build the $160 million plant on the site of its Chelopech copper and gold mine by 2012, despite worries about demand due to the global slowdown. “We are in intensive talks with the European Bank for reconstruction and development. I do not consider funding the project a problem,” Nestor told a news conference.
The Bulgarian government will provide 25 per cent of the total investment, and will hold a 25 per cent stake in the new smelter in Chelopech, 65 km east of Sofia. Under the same deal, Dundee has agreed to pay a higher concession fee to the state. Nestor said Dundee would invest $6 million in 2009 to modernise and expand its gold mine. It plans to produce 850,000 tonnes of ore this year, down from 900,000 in 2008 due to planned upgrade works.