GOLD PRICE NEWS – The gold price, at $1,514 per ounce, traded near unchanged Tuesday morning against a backdrop of higher stock and commodity prices. The price of gold moved back above $1,500 yesterday as the U.S. dollar failed to follow through on its rally late last week against the euro. Silver prices followed the gold price higher and have now gained 7.3% this week after last week’s historic 27% drop.
On Monday, the gold price rallied over 1% amid a rebound in precious and industrial metals. The price of gold climbed $18.00 late yesterday afternoon as the U.S. dollar relinquished its earlier gains against a basket of foreign currencies. Silver prices spiked $2.26, or 6.3%, to $37.90 per ounce. In doing so, the price of gold and silver recaptured a considerable portion of last week’s declines, and extended their respective year-to-date gains to 22.5% and 6.5%.
Gold equities bounced back in concert with the gold price, as the AMEX Gold Bugs Index (HUI) rose 1.8% to 544.55. Among large-cap gold shares, AngloGold Ashanti (AU) and Goldcorp (GG) jumped 1.7% and 2.7%, respectively. The Market Vectors Junior Gold Miners ETF (GDXJ), a basket of small- and mid-cap gold equities, rallied 2.3% to $37.70 per share. Notable advancers included GDXJ components Allied Nevada Gold (ANV) and New Gold (NGD), with gains of 1.8% and 2.5%, respectively.
One catalyst for last week’s gold price sell-off was a report that two prominent investors, George Soros and John Burbank, each sold a substantial portion of their gold holdings. On Monday, Burbank – founder and chief investment officer of $4.6 billion hedge fund Passport Capital – expounded on his gold price outlook in a Bloomberg interview.
Burbank explained that his firm trimmed its long positions tied to the gold price in late April due to the significant rally in recent months and the fact that QE2 is ending June 30th. He noted that many asset classes that have surged higher since the start of QE2 in November 2010, particularly commodities and equities, are likely to undergo a correction in the months ahead as investors reposition toward more “risk off” portfolios.
The Passport Capital founder elaborated: “I think risk assets sell off. I think they sell off now into it and we bottom again in commodities this summer. I think the better bet is to be cautious and just have some perspective about where things traded when QE2 started.” He noted that the gold price was $1350, oil was $85, and silver was $25 at that time. “I am not predicting it will go back to these levels, but the better bet, unless there is some other kind of liquidity coming from governments, is that they trend back those levels.”
Despite his cautious near-term view on the gold price, Burbank reiterated his longer-term positive outlook. “The biggest reason to stay in gold is because central banks around the world can see the writing on the wall long term, which is that the dollar will be devalued one way or another and that Congress has no appetite for hard decisions which would be deflationary in nature, and therefore, make the dollar higher than gold and not as much of a necessary holding.”
“I think ultimately, physical gold is the story. It is a scarcity story,” Burbank continued. “The more the U.S. dithers and the more the Fed is willing to print money, as opposed to dealing with inflation properly, the more this trend will happen. That is the biggest reason to stay in gold right now.”
When asked the manner in which he is seeking exposure to the gold price, Burbank responded through physical gold and small-cap gold companies with significant growth potential. Although he did not mention any gold companies by name, he noted that “We have two geologists based in Vancouver, and we think we have a good edge on which explorers are the right ones to own. We are buying, even now, and will continue to be to accumulate stakes there.”
The Producer Price Index (PPI) and Consumer Price Index (CPI) will be released on Thursday and Friday, respectively. Inflation data will be highly scrutinized for clues as to whether the recent surge in commodities is causing price pressures. Gold prices have maintained their uptrend in part due to the belief that the Fed is on hold well into the future given the lack of inflation in the system. Any upside surprises have the potential to change this consensus and lead to short-term weakness in the gold price and the broader commodity complex.
Colossus Minerals (CSI.TSX) announced the appointment of Paulo de Tarso Serpa Fagundes as the Company’s new Chief Operating Officer, effective May 9, 2011. Mr. Fagundes has 30 years experience in the mining industry and brings strong operating experience, specifically with respect to South American mining projects. He most recently served as General Manager of the Mercedes Mine in Mexico for Yamana Gold (AUY), where he was responsible for the development of an underground gold mine. Full Colossus Minerals News Release.
- From 2007 to 2009, Mr. Fagundes served as General Manager of Yamana’s San Andres Mine in Honduras; responsible for operations, administration and a successful expansion of the project.
- Mr. Fagundes stated that “I am very excited to be joining Colossus at such a pivotal moment in the history of the Company. This is a tremendous opportunity to contribute in bringing the high profile, historically significant Serra Pelada mine into production.”
- Randy Reichert, Colossus’ previous President and COO, is no longer with the Company; Ari Sussman, Colossus’ CEO, has assumed the role of President.