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By Kishori Krishnan Exclusive To Gold Investing News

Gold, despite losing some of its appeal as a safe-haven asset amid sentiment the worst of the financial crisis may be over, is holding its ground on expectations of long-term inflation once the economy reheats. But how long will it last, is the moot question. Analysts aver that it may soon, however, traverse the downward path, with more and more investors moving money out of gold and into stocks.

Even as renewed confidence in the equities market and appetite for risk reduced the need for a safe haven, the price of gold has been lodged above $900 per ounce. “We seemed to avoid that fear about the financial meltdown. Now, people are looking forward through the valley of this economic crisis and thinking maybe the problem is going to be too much inflation because we are creating too much money,” said Caesar Bryan, who manages $450 million assets at Gamco Gold Fund in New York.

Recoveries in other commodities in recent weeks have not eroded the appetite for bullion much, the thinking being that the government’s nearly $2 trillion economic and financial system bailout means that inflation will surface someday.

On Friday, U.S. gold futures for June delivery traded at $910, still far under a 2009 peak set above $1,000 on February 20 on safe-haven demand as equities plummeted.

Year to date, gold is up about 3 per cent, while other economically sensitive commodities have rallied, with copper futures up more than 50 per cent. Crude oil had reached a 2009 high of over $58 a barrel on Friday, recovered from levels around $34 set earlier in the year.

Incidentally, Africa’s three gold producers have reported big jumps in earnings and cash flow for their quarters to March, largely boosted by a stronger gold price, which outweighed lower output and higher costs. The price of gold in the quarter averaged $908 per ounce, up 14 per cent on the previous quarter.

“We expect a very strong showing from the South Africa gold producers for (calendar) Q1 2009,” said Leon Esterhuizen, a London-based precious metals analyst at RBC Capital Markets. Looking forward, analysts were concerned about rising costs, especially in view of a less bullish outlook for gold in the comings months.

Gold Fields (GFIJ.J), the world’s No. 4 gold producer, more than doubled adjusted headline earnings per share for its third quarter after gold prices rose. Gold Fields, the second-biggest gold producer in Africa, said earnings rose after it boosted output and trimmed costs due to lower raw material prices, and the price of gold averaged $908 per ounce, up 14 per cent on the December quarter.

Gold Fields forecast a 3 per cent rise in output to 900,000 ounces in the fourth quarter to end-June, short of its own target of 1 million ounces a quarter, which it set last year. “One million ounces a quarter is still a target, but I cannot say when we will get to this,” Nick Holland, Gold Fields chief executive officer, told a media briefing.

Holland said his company was exploring a rich vein of projects. He said a big contribution could come from its South Deep mine in South Africa, which is expected to produce 800,000 ounces a year by 2014 from some 200,000 ounces presently, after an injection of some $850 million from the group’s own coffers.

“We’ve made cash this quarter,” Holland said. “We have seen a more benign cost scenario around the world as inflation comes down. In the quarters that follow, I expect us to continue increasing production.”

Reuters reported that Colombia’s government has approved a temporary permit for AngloGold Ashanti (ANGJ.J) to carry out limited exploration work for the country’s La Colosa gold mine, the environmental ministry said. The permit allows AngloGold to temporarily explore on small portion of the site, but does not guarantee the world’s No. 3 gold miner will be granted later rights to mine gold from the project, a ministry statement said.

Authorities halted activities at the mine in central Tolima province a year ago due to concerns that the area includes forest reserves and the project has since become a point of discussion for some local lawmakers. “This administrative act does not generate any right to exploit minerals,” the ministry said.

Africa’s third biggest producer, Harmony Gold Mining Co. (HARJ.J), the world’s No.5 producer, on Friday reported lower output and headline earnings per share for the March quarter at 123 cents from a re-stated 121 cents in the December quarter. Production fell to 349,801 ounces in the three months to end-March, and the lower output pushed cash costs higher to $537 per ounce from $527 an ounce in the December quarter.

Harmony said it expected the uncertainty in world-wide markets in the wake of the financial crisis would support a stronger gold price. In the March quarter, the gold price hit record highs above 300,000 rand ($35,710) per kg and $900 an ounce.

“Gold has become a currency rather than a commodity – a good reason for us to remain bullish about the gold price,” Graham Briggs, Harmony’s chief executive officer said.

Stocks shimmer

Randgold Resources (GOLD) was upgraded on March 11 by analysts at Citigroup and the stock is now at $56.12, up $2.57 (4.80 per cent) on volume of 922,451 shares traded. The analysts upgraded the stock to `Buy’ from `Hold’. Over the last 52 weeks, the stock has ranged from a low of $22.28 to a high of $56.89. Randgold Resources stock has been showing support around $50.70 and resistance in the $55.70 range, analysts said. Technical indicators for the stock are neutral.

Kinross Gold (NYSE: KGC) ended the last trading session at $16.64. So far the stock has hit a 52-week low of $6.85 and 52-week high of $25.36. The proprietary key risk ranking for KGC has improved. This key ranking is determined daily and is a measure of the relative risk for a conservative covered call trade on this underlying stock with a targeted 11.21 per cent return (16.37 per cent annualized for comparison purposes). The ranking looks at many factors related to the stock.

iShares Comex Gold Trust (PCX: IAU) ended the last trading session at $90.03. So far the stock has hit a 52-week low of $68.90 and 52-week high of $99.06. The proprietary key risk ranking for IAU has declined. A conservative covered call trade on this underlying stock has a targeted 4.61 per cent return (24.77 per cent annualized for comparison purposes). according to traders.

Barrick Gold (NYSE: ABX) ended the last trading session at $34.04. So far the stock has hit a 52-week low of $17.27 and 52-week high of $52.48. The proprietary key risk ranking for ABX has improved. An optimal calendar spread trade on this underlying stock has a targeted 100.00 per cent return (146.00 per cent annualized for comparison purposes).

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