gold running hot again
Gold runs hot again By Barry Fitzgerald Resources Editor September 14, 2005
www.theage.com.au *
Gold is the hot metal again and its recent spurt to more than $US450 an ounce has put it within reach of 17-year highs.
Gold is the hot metal again and its recent spurt to more than $US450 an ounce has put it within reach of 17-year highs. Photo: Supplied
JOHN Quinn has been knocking around the goldmining industry for near on 35 years, first with Newmont/Newcrest and more recently with Perseverance Corporation. So you might think he is well qualified to make a call on where the gold price is headed.
"I am not really experienced enough to make a prediction," Quinn quipped yesterday when asked to look into his crystal ball — an acknowledgement that predicting gold's next move is fraught with difficulty.
But what Quinn, chairman of Perseverance, was prepared to say was that the underlying supply/demand picture for the yellow metal, and its speculative hedging role in currency markets, pointed to continued price strength.
The same thinking has been behind gold's recent spurt to a nine-month high of more than $US450 an ounce, putting it within easy reach of 17-year highs if the current bullish halo around the metal transforms into further price strength.
It does not matter all that much for the local miners if gold's strength also means strength in the Australian dollar, offsetting the strength in the US dollar gold price and stopping the local gold price from charging through to more than $A600 an ounce. AdvertisementAdvertisement
Confidence in the sector by both the industry and investors is driven by sentiment towards the gold price outlook more than anything else. At the moment, that sentiment could not be better, allowing gold equities to catch up with their booming base metals cousins.
"It makes everyone more confident looking into the future," Quinn said of the latest gold price rise. "You redouble your exploration effort and take up every opportunity to increase production."
In the past two months, gold has put on about $US25 an ounce, continuing a four-year trend of rising prices from the 2001 lows of less than $US300 an ounce.
That bull run is welcomed by Perseverance as it cranks up production for its new sulphide gold operation at Fosterville, 20 kilometres east of Bendigo. It's on its way to becoming a 135,000 ounce-a-year producer at a forecast cash cost of about $US230 an ounce.
Analysts at Goldman Sachs JBWere yesterday added that broking firm's name to the growing gold price cheer squad, saying they expected gold to trade in a range of $US420 to $US520 an ounce over the next year with a "gradual migration towards the upper end of this range".
Analysts Ian Preston and Malcolm Southwood said their view was based on continuing US dollar weakness, rising inflation and an increasing risk that high oil prices would hurt economic growth expectations.
The resurgence in physical gold demand at a time when global gold production is stagnant would also help the gold price, as would continued reduction in gold hedging by producers and reduced sales by central banks.
Having said that, the analysts have kept their gold price forecast for the balance of 2005 at $US437 an ounce and $US443 an ounce in 2006.
"Gold at $US450 an ounce is great news for Victoria's goldminers," the executive director of the Minerals Council of Australia's Victorian division, Chris Fraser, said yesterday.
He said the price would underpin the current expansion of the Victorian gold sector and encourage explorers across the state.
"Existing producers Leviathan Resources at Stawell and Perseverance at Fosterville were immediate beneficiaries," Mr Fraser said.
"Emerging producers such as Ballarat Goldfields and Bendigo Mining will no doubt be buoyed by the increased price."
Ballarat is due to start production later this year and Bendigo in mid-2006.
"There are a few advanced exploration projects such as Goldstar's Walhalla project and Alliance's Maldon project that will also be greatly encouraged."
SBM Price at posting:
0.0¢ Sentiment: None Disclosure: Held
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