Fiscal Cliff Threatens Gold

New data indicating that the Eurozone slipped into a  recession during the third quarter of 2012 and concern that the approaching fiscal cliff — a mix of government spending cuts and tax hikes expected to hit the United States in early 2013 — will send the US down the same path kept gold prices down this week. Gold was down $16.30, or 0.9 percent, midday on Thursday at a low of $1,713.80. Gold ended the day slightly higher at $1,716.21.

Also contributing to gold’s decline on Thursday was a report from the World Gold Council that states that “[g]lobal gold demand reflects challenging global economic climate: ETFs up 56% and India up 9% in Q3 2012.” Overall, the report indicates that global gold demand has fallen 11 percent in tonnage over the three months leading up to September compared to the same period last year. That lag can be attributed to lower demand from China, which is still suffering from an economic slowdown. However, increased third-quarter buying in India has lent support to the yellow metal.

Diwali doesn’t shine as bright in 2012

Dhanteras, a festival celebrated two days before Diwali, is an auspicious time for Indians to buy gold. However, gold did not shine very brightly during this year’s five-day Diwali festival. High gold prices in India curbed sales, according to a recent article in The Wall Street Journal (WSJ). Prithviraj Kothari, director of gold-trading firm RidhiSidhi Bullion and former president of the Bombay Bullion Association, told the WSJ that “sales during the last week of the festival season, including during Diwali, totaled only around 70% of last year’s 100 metric tons.”

However, despite high gold prices, which climbed this week to 32,250 rupees ($589) per 10 grams, ETF sales were up on both major Indian exchanges. Money Guru India reported that ETF sales reached a record value of Rs 1,337 crore on the NSE; meanwhile, the BSE posted a turnover of Rs 894.55 crore.

Optimism despite negative press

Despite gold’s lackluster performance of late, the world’s largest gold mining company is comfortable forecasting a bright future for the yellow metal. This week, Barrick Gold’s (TSX:ABX,NYSE:ABX) CEO, Jamie Sokalsky, told Reuters that he sees gold prices hitting $2,000 an ounce in 2013 due to rising costs and production constraints keeping a firm hold on supply. Demand from China and central banks, he maintained, will keep going up as rising costs and production constraints hold supply in check.

“If demand continues to rise, which we think it will through China buying more gold, more investment demand for gold, (and) central banks continuing buying more gold rather than selling as they used to, I feel quite comfortable predicting that gold prices will within the next year be at $2,000, perhaps higher,” Sokalsky stated to Reuters. “It’s going to be a demand-driven type of move.”

Company news

Endeavour Mining (TSX:EDV,ASX:EVR) announced that in Q3 it produced 49,468 ounces of gold compared to 24,047 ounces the during the previous period. The company expects to deliver 300,000 ounces of gold this year.

Neil Woodyer, Endeavour’s CEO, commented, “[o]ur Nzema and Youga mines have delivered another strong quarter of production and cash flow, with our 9 month production totaling over 152,000 ounces and generating $121 million of operating cash flow. Now that we have completed the Avion acquisition and added a third mine, Tabakoto, our full year 2012 gold production is expected to be approximately 300,000 ounces and our growth pipeline has expanded.”

The company plans to complete the expansion of the mill at Tabakoto in early 2013. Endeavour expects that the expansion will increase production at Tabakoto to roughly 150,000 ounces of gold per year.

Evolving Gold (TSX:EVG,OTCQX:EVOGF) announced this week that it intersected additional high-grade gold at its Arch target along the Carlin trend in Nevada. Drill hole highlights include hole CAR-021, which intersected an upper interval of 27.7 meters at 4.97 grams per tonne of gold.

R. Bruce Duncan, Evolving Gold’s CEO, commented, “These results continue to demonstrate that we have identified a significant zone of high grade gold mineralization on our Carlin land holdings in Nevada.” The results are encouraging for Duncan, who believes that the high-grade potential is completely open along strike.

Junior company news

On November 14, Majestic Gold (TSXV:MJS) announced its preliminary gold production report from the Song Jiagou gold mine for the financial quarter ended September 30, 2012. The company produced a total of 18,969 ounces of gold for the 2012 fiscal year.

Majestic anticipates that its gold production will increase over the next nine months as Zhongjia starts processing higher-grade ore from the main ore body. The company’s annual production goal is 100,000 ounces.

CEO Rod Husband stated, “[a]nnualized gold production of almost 19,000 ounces is consistent with our expectations based on our Mine Plan and indicates steady progress toward our production goal of 100,000 ounces per year when we reach the higher grade portion of the ore body.”

Source Exploration (TSXV:SOP) reported that four new drill holes have extended its recent high-grade discovery zone at the Las Minas property in Mexico by 35 meters. Drill hole LM-SC-12-45, returned 15.89 grams per tonne gold, 12.98 grams per tonne silver and 2.25 percent copper over 10 meters. Source has outlined the high-grade zone using detailed drilling over a strike length of 55 meters.

President and CEO Brian Robertson commented, “[w]e are excited about these new drill results, which continue to expand the high-grade Santa Cruz target. The recent drilling has also increased our understanding of the controls and association of the high-grade gold – silver – copper zones with magnetite. Our ground magnetic survey is underway, and we expect the results will lead to other high-grade gold – silver – copper discoveries on the property.”

Barkerville Gold Mines (TSXV:BGMreceived a partial revocation order (PRO) from the cease trade order issued in August by the British Columbia Securities Commission. Through the PRO, Barkerville is eligible to receive a loan from Frank Callaghan, the company’s president and CEO.

Callaghan has agreed to advance the aggregate principal sum of up to $2,441,820. The loan will bear interest upon its start date at a rate of 20 percent per year, with all interest payable in full to Callaghan upon repayment of the principal sum within six months.

 

Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.