By Dave Brown – Exclusive to GoldInvestingNews.com

We are now into the month of August, and much of the world is anticipating the arrival of the 29th Olympic Games in China. The year 2008, marks the year of the rat in the Chinese zodiac and the month of the August coincides with the symbol of the sun. Zodiac enthusiasts believe people born in this month will generally possess a strong aptitude to process information quickly and correctly. They also have a penchant for engaging in risk tolerant behavior with a keen awareness of relationships between concepts. Perhaps August of 2008 will mark a similar change for capital markets, and behavior may return from the recent past to a more rational and predictable model. Many equity and gold investors would also welcome a return for levels of risk being rewarded with appropriate returns.

The biggest economic news story on Friday was the announcement of weak numbers being posted by U.S. payrolls falling by 75,000 after a 62,000 decline in June, according to the median estimate of 80 economists surveyed by Bloomberg News. Other headlines sharing the space included: Eurozone inflation hitting record 4.1% in July, India’s booming economy on verge of rapid descent, and high energy costs may push U.K. inflation to a 16-year high. Markets reacted indifferently to the negative news flow, with the S&P 500 rising on a week over week basis for the second time since May and the Dow Jones Industrial Average trading slightly lower on the week. The spot price of gold finished off the week at USD $910.95 per troy ounce, which was a slight decrease of 0.3% from Thursday’s closing price.

Company News

It has been an extremely busy week for gold investors with earnings season beginning to heat up, and many companies reporting financial results. Companies announcing on Thursday, included: Barrick Gold Corp. (TSX: ABX, NYSE: ABX), Anglogold Ashanti (JSE: ANG, NYSE: AU), Goldcorp Inc. (TSX: G), Randgold Resources (LSE: RRS, NASDAQ: GOLD), Centerra Gold (TSX: CG), and OceanaGold (ASX: OGC, TSX: OGC). The excitement for gold investors continued on Friday, with results being released by: Gold Fields Ltd. (JSE: GFI), Eldorado Gold Corporation (AMEX: EGO, TSX: ELD), and Northgate Minerals Corp. (TSX: NGX).

Geographic Risk Discount

Merrill Lynch’s gold and precious metals analyst Michael Jalonen, has issued a bullish recommendation on Eldorado Gold Corporation (AMEX: EGO, TSX: ELD), after Friday’s earnings release. Mr. Jalonen’s investment case was underscored by Eldorado’s above industry average gold production growth, however he cautioned investors relating to legal uncertainty involving its Turkish assets. A price objective of USD $9.50 was established by Mr. Jalonen which reflects a 12.0% premium to the company’s current valuation. The company ended the week on a positive note up 4.1% over Thursday’s price to finish at USD $8.48.

Project Funding in Question

OceanaGold (ASX: OGC, TSX: OGC), reported its second quarter of FY2008 financial results on Thursday. Operating cash flow margins were reduced, primarily due to negative foreign exchange on the currency and materially higher fuel and power costs for its New Zealand operations. Gold production was up 65%, and sales skyrocketed 166%, but the operational costs also increased 27%. CEO Steve Orr offered company guidance for the second half of FY 2008 for improved ore grade, and continued good operational performance, with power shifted back to a hydro electrical source.

BMO Capital Markets metals and mining research analyst, David Haughton released commentary on OceanaGold on Friday which indicates an “Outperform” recommendation on the stock. Mr. Haughton’s enthusiasm for the stock was tempered with a cautionary view of an undeveloped, promising gold copper porphyry project in the Northern Philippines named Didipio. Towards the end of June, the company advised of a temporary suspension of some of the project activities, pending the finalization of funding. Mr. Haughton issued a price target of AUD $1.25 with the belief that the current valuation of the, “share price reflects the equity overhang associated with the funding of Didipio and the disappointing news flow”.

OceanaGold is an Australasian gold producer, with corporate headquarters in Melbourne, Australia; and a diverse portfolio of operational, developmental and exploration assets, including the largest gold mine operating in New Zealand. The company has a market capitalization of AUD $129 M and the stock price closed the week trading at AUD $0.74, which represents a 52 week low.

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