GOLD PRICE NEWS – The gold price opened the first full week in July to the upside, surging higher by $19.25 Tuesday morning to $1,507 per ounce. The price of gold was boosted by strong investment demand as investors and traders bet the recent $99 correction was over. Silver followed gold higher, climbing 2.9% to $34.87 per ounce. Precious metals prices rose despite gains in the U.S. dollar against the euro and versus most of America’s trading partners.
Commodities moved higher alongside the gold price with every single one of the 19 components of the Reuters/Jefferies CRB Index trading higher. Oil rose 0.8% to $96.69 per barrel following a bullish article in this weekend’s Barron’s that speculated $150 oil will be hit in the next year.
Gold mining stocks moved higher across the board early Tuesday morning. Last week, gold equities outperformed the gold price for the first time in several months. The AMEX Gold Bugs Index (HUI), a basket of the world’s largest gold companies, rallied 2.4%, while the price of gold fell 1.1%. Barrick Gold (ABX), Goldcorp (GG), and Newmont Mining (NEM) posted weekly advances of 4.0%, 1.3%, and 2.0%, respectively. Despite last week’s gains, however, the HUI continues to trail the gold price by a wide margin year-to-date – posting a loss of 10.5% versus a 4.6% gain for the yellow metal.
Looking ahead, a growing number of analysts and investors have postulated that the underperformance of gold shares relative to the gold price is likely to reverse. Evy Hambro, portfolio manager of the £2.9 billion BlackRock Gold and General fund, reiterated his bullish outlook on the gold sector in an interview with Investment Week in England. ”We expect to see an ongoing trend of dividend growth in the gold industry, reflecting the strength of their earnings and balance sheets,” Hambro stated.
Hambro, whose fund has returned 117.1% over the past five years, went on to say that the rising gold price is feeding through to the bottom lines of gold producers. He noted that as a result of the surging price of gold, a growing contingent of gold companies have already raised their dividend payouts – including Barrick, Newmont, Goldcorp, Alamos Gold (AGI.TSX), Centerra Gold (CG.TSX), and Newcrest (NCM.ASX).
Although the gold price has slid from its $1,577.40 record high to below $1,500 in recent months, Hambro contended that it is merely a correction in the ongoing gold price bull market. ”Investment demand has been the most important driver of the bull market to date,” Hambro said, “and the key factors that have been driving investment demand – concerns about financial markets, Eurozone debt and inflation – are likely to persist for the foreseeable future.” The Blackrock fund manager also noted that “the potential for further net purchases by central banks could also be supportive” of the gold price.
As for potential headwinds for the gold price, Hambro noted that “the key threat to the gold market is an increase in real interest rates.” While he does not expect this to occur anytime soon, Hambro noted, “When real interest rates begin to rise, the opportunity cost of holding gold will encourage investors to sell the metal. At the moment, we believe the current interest rate and exchange rate environment remain bullish” for the gold price.
San Gold Makes Key Director Appointments
