By Dave Brown – Exclusive to Gold Investing News
Traditionally, gold has represented a non-correlated asset class but more recently, an increased linkage has been observed by many analysts.
Bloomberg quotes John Reade, Metals Strategist at UBS, “In the short term, gold’s direction will be determined by the moves in crude oil.” This will necessitate that the primary catalysts for crude oil price movements should also create an impact on gold price. With oil platforms in and around the Gulf accounting for more than one-fourth of U.S. oil production, anticipation and concern about Hurricane Gustav’s approach were partially to blame for an increase in oil prices heading into the labour day weekend.
Hurricane Gustav bares the same moniker as Austrian Symbolist painter and prominent member of the Vienna Secession movement, Gustav Klimt. Gold played a particularly significant role in the historic painter’s life, as the artist received the ‘Golden order of Merit’ from Emperor Franz Josef I of Austria for his contributions to Art. Later, he even experienced a ‘Golden Phase’ when many of his creations featured the prominent use of gold leaf. Avoiding an ironic case of “life imitating art”, the positive news story of the arrival of Hurricane Gustav into the Louisiana and Gulf Coast area, sent commodity prices down, as government and industry officials began assessing the damage, which wasn’t as extensive as they had feared.
Gold traded down to $810.50 per troy ounce, which was a slight decline of 2.9 per cent over the previous day’s close.
High Flying Juniors
Last week, the Gold Sector Research Team at Paradigm Capital Inc. issued a report on junior gold developers. In reviewing a number of companies, the underlying message was that the associated high total costs, both in terms of operating and capital costs, makes junior gold developers particularly sensitive to changes in the market’s outlook for precious metals. The slightly bullish report features commentary on near term gold price movement, “we expect a rebound in the metal price, but liquidity is likely to remain a concern. We continue to recommend investors focus on liquid gold producers, with a mix of quality development projects.” Additional guidance advocated “that the gold price and stocks will be in for a nice rebound (20-30 per cent) this autumn-winter. Stay liquid – the lion’s share of money flowing into the sector seems likely to be from generalists, who tend to stick to the most liquid stories. Likewise, it will be more important than usual to be able to trade in and out of gold equities.”
Company News
International Tower Hill Mines Ltd. (TSX-V: ITH) announced the results of its initial resource estimate for the Mayflower deposit at its North Bullfrog project near Beatty, Nevada. The initial resource estimates cover part of the Mayflower gold system which remains open and indicates potential for a bulk tonnage deposit. The Mayflower resource estimate is the first step in documenting the potential precious metal resources within the North Bullfrog lease.
Michael Gray, analyst for Genuity Capital Markets issued a “buy” recommendation on the stock. Mr. Gray did caution investors that, although the gold deposit is near the surface and with very close proximity to processing facilities and excellent distribution networks, “the attributable size of the resource is relatively small (56,615 oz gold) at this time”. The analyst has a price target of CAD $4.60 which represents a 207 per cent premium to current valuation levels. The share price strengthened on the news release, closing the day at CAD $ 1.50 for an increase of 2.7 per cent from the previous trading session.
International Tower Hill Mines, Ltd., has been actively engaged in the acquisition and exploration of natural resource properties in Alaska and Nevada. It focuses its exploration activity primarily on precious and base metals, including gold, silver, copper, and zinc. The company holds interests in 11 mineral properties in Alaska in addition to two properties in Nebraska. Headquartered in Vancouver, the company has a market capitalization of CAD $84.1 m, and is scheduled to be represented at the Denver Gold Forum, later this week from September 7-10.
