Gold prices started off the week trading higher based on Monday’s news that Federal Reserve Chairman Ben Bernanke believes the United States’ economy has to grow more quickly to reduce the unemployment rate. Although Bernanke did not directly indicate the beginning of a follow up round of bond purchases, he said a continuation of accommodative policies is required to support faster growth. The spot market price of gold traded as high as $1,695.60 per troy ounce on Tuesday before contracting to the current range of $1,654.90. Overall, spot market gold prices have appreciated slightly by about 0.7 percent this week.
For investors, gold prices could be stimulated by data from the US, including final fourth quarter growth results, corporate profits numbers, and weekly jobless claims. Strong results from this data may undermine the case for additional monetary easing, which could act as a drag on gold price. However, weaker results could underscore support for a fresh round of quantitative easing, leading to a possible stimulation of gold price appreciation. The Federal Open Market Committee is next expected to meet on April 24, with Bernanke’s address on the following day.
Jeffrey Christian, Managing Director at CPM Group, recently discussed his analysis of gold price drivers for 2012. Over the coming decade, Christian forecasts that gold mine supply will increase at a relatively strong rate, secondary supply will be flat, retail investors and central banks will remain net buyers of gold, and fabrication demand will show signs of improvement. The combination of these factors will be reflected in historically high gold prices; however, an overall reduction in price volatility relative to the past decade is expected. According to Christian, for this year, “we think the intra-day high for gold probably was in September at $1,920, but if you look at the gold price on an annual average basis, we expect it to be higher this year [at] $1,640 or $1,650 per ounce compared to about $1,567 last year.”
Barrick Gold Corp. (TSX:ABX,NYSE:ABX) claims that Goldcorp Inc. (TSX:G,NYSE:GG) illegally obtained control of Chile’s El Morro gold and copper deposit. The dispute over the property has gone on for more than two years, with a final decision expected in the near future. The disputed resource is significant in scale and could hold more than three times the amount of gold that Goldcorp produced last year.
This news is of importance to gold investors as Ernst & Young recently noted that the biggest risk for mining companies this year is resource nationalism. Political challenges for resources and inter-company disputes often result in mining claims being determined by judicial procedures. Both of these scenarios require additional legal expenses and potential operational impediments, which ultimately reduce bottom line profitability. Higher tax rates, climbing labor costs, and inflationary oil prices are already impacting financial results for gold miners and increasing the cut-off bar on new projects, making it much more difficult for companies to replace reserves and expand production targets.
Investors may not be disappointed if Goldcorp loses the case, as the company did not include planned output from El Morro in its five-year forecast guide. However, a ruling in favor of the company might strengthen share prices. Barrick and Goldcorp are joint venture partners in other projects.
Angkor Gold Corp. (TSXV:ANK) has deployed a third diamond drill in Cambodia at its Katieng prospect. Drilling is set to commence on geochemical targets at the property. After Angkor completes the Katieng program, the rig will be moved to either its Kunmum prospect or the Oyadao tenement.
Continental Gold Ltd. (TSX:CNL,OTC Pink:CGOOF) announced that a preliminary economic assessment (PEA) on the company’s Buriticá Project is expected to be ready by the end of this year. The company hopes to have an updated NI 43-101 by the third quarter of this year.
Geologix Explorations Inc. (TSX:GIX,FWB:GF6) announced the latest resource updates from its Tepal project. The company reported results from 41,247.5 metres of drilling during 2011 at the Mexican property. Geologix aims to complete a pre-feasibility study by the end of the second quarter.
