GOLD PRICE NEWS – The gold price continued its record-setting run Thursday, climbing to $1,678.50 per ounce. The price of gold soared despite broad-based strength in the U.S. dollar, which gained 4% versus the yen after intervention in the currency markets by the Bank of Japan. Concerns over the prospect of a double-dip recession in the U.S. have boosted the allure of gold and weighed heavily on global stock markets in recent weeks.
The gold price advanced to a new record high yesterday for the fifth day in eight trading sessions. The spot price of gold reached an intra-day high of $1,672.80 per ounce, boosted by ongoing economic worries in the United States and Europe. COMEX gold futures, per the December contract, hit a new all-time high of $1,675.90 per ounce.
Although the gold price garnered the majority of attention in the precious metals sector, in recent days silver has outperformed the yellow metal. Silver futures for September delivery climbed as much as 3.3% to $42.06 per ounce, the highest level for the most actively-traded contract since May 2.
Shares of precious metals companies moved higher alongside the price of gold and silver Thursday, looking to advance for the fourth consecutive day. The Philadelphia Gold & Silver Index (XAU) climbed 0.8% to 209.80 on Wednesday, extending its weekly gain to 1.9%. Goldcorp (GG), the sector’s second largest component, rose $0.40 to $48.77 after Dundee Securities upgraded it from “Neutral” to “Buy.” Other notable advancers included Yamana Gold (AUY), Eldorado Gold (EGO), and Kinross Gold (KGC) – which added 2.2%, 1.1%, and 0.9%, respectively.
With the gold price posting a series of new all-time highs this week, sentiment toward the yellow metal has risen in kind. Market Vane’s Bullish Consensus figure reached 87% on Wednesday, just below territory historically associated with short-term peaks in the price of gold. From a contrarian perspective, this level of bullish sentiment is a warning signal that the gold price may be due for a correction.
Notwithstanding the shorter-term outlook for the gold price, several noteworthy investors believe the gold price will continue to move higher in the months and years ahead. John Taylor, founder of the world’s largest currency hedge fund in FX Concepts, recently predicted the gold price will reach $1,900 per ounce by October of this year.
Marc Faber, a long-time gold bull and editor of The Gloom, Boom and Doom Report, commented that ” I just calculated that if we take an average gold price of say around $350 in the 1980s and compare that to the average monetary base and the average U.S. government debt in the 1980s…and then if I compare this to the price of gold to today’s government debts and monetary base, gold hasn’t gone up at all. It’s actually gone against these monetary aggregates, and against debt it’s actually gone down. So I could make the case that gold is today probably very inexpensive.”
Over the past week, a key catalyst for the gold price rally has been the deterioration in U.S. economic data. In light of the recent stretch of worse than expected reports, on Wednesday J.P. Morgan lowered its growth outlook for the U.S. economy. The firm cut its GDP estimates to 1.5% from 2.5% in the third quarter of 2011; to 2.5% from 3.0% in the fourth quarter; and to 2.0% from 2.5% in the first half of 2012. In addition, J.P. Morgan is now forecasting that the Federal Reserve will not begin to raise interest rates until the middle of 2013, versus its previous estimate of the start of 2013.
Needless to say, a more dovish Federal Reserve and a longer period of negative real interest rates make the case for a higher gold price that much stronger.
Extorre Gold Mines Releases Updated PEA
The PEA2 is based on a NI 43-101 compliant mineral resource estimate completed in April 2011 which included drilling completed on the Escondida, Loma Escondida, and Gabriela zones up until January 2011. Extorre noted that the PEA2 is an interim study and does not include drilling from the recently discovered high grade Zoe vein or potential new resources from the Martina, Carla and Esperanza veins. An updated resource estimate that will include these veins is scheduled for release in the fourth quarter of this year. Full Extorre Gold Mines Press Release.
- Total precious metal production of 494,700 ounces of gold and 26.6 million ounces of silver over 8.25 years, based on mining and milling 1000t ore/day.
- For the first 3 years, gold production averages 111,200 ounces/yr plus silver production of 4.7 million ounces/yr, for an average gold equivalent production of 206,300 ounces per year.
- Average cash costs of $236 per ounce on a gold equivalent basis.
- Pre-tax undiscounted cash flow of $581 million and Payback Period of 12 months at a 0% discount rate.