(TSX: AGI).
Much continues to lie ahead for gold, as it moves through the summer months. Right now as we stand in the middle of a correction, the Standard Bank in its Precious Metals Daily Report has said that, "Following the massive 7.3% or $44.50 drop overnight, and the fact that the 30-day Relative Strength Indicator is indicating that gold is heavily oversold (although the market could continue to be oversold), the market could expect a bounce to re-correct the overdone price correction."
Putting things in their perspective, the World Gold Council offered that, "The beginning of 2006 saw a mixed reaction to rising gold prices from retail investors around the world. Many long-standing investors saw surging prices as an opportunity to take profits, even pushing off take into negative territory for a few countries. Elsewhere rising prices produced a fresh interest in gold from new investors."
With an increase in interest coming from the side of investors, comes the rising demand for supplies and new gold discoveries. The Council also reported that to date, "Total gold supply declined by 15%, to 868 tonnes, on the same period in 2005." Commenting on how the commodity fares in terms of supply and demand, Scott Emerson, Chairman and Director of Golden Peaks Resources Ltd. (TSX-V: GL), an international exploration and resource development firm focused on Argentina, has said that, "We view this as an opportunity. Golden Peaks is a well financed junior exploration company with highly prospective gold projects and on-going exploration programs. The Company's La Fortuna project continues to deliver extremely positive results."
The Viewpoint of Major, Mid-Tier Gold Producers and Senior Tier Explorationists:
Goldcorp Inc. (TSX: G; NYSE: GG) a well-known company which currently ranks in the top three among North American producers, with two million ounces of output on average per year. Ian Telfer President and CEO has commented that, "World gold supplies are under pressure as mine production around the world is declining. It is true, some mid tier producers will increase production in the years ahead, we do not view these companies as potential acquisitions."
Telfer says that, "As a senior gold producer, the biggest challenge is maintaining the production levels for the next 10 to 20 years. Goldcorp will be able to maintain its' production between 2-3 million oz/yr, by acquiring new projects such as Eleonore, approximately every 2 years."
On the other hand, mid-tier producers have a different take on the opportunities that may lie ahead. Speaking on this topic, Marino G. Pieterse, commentator for Kitco Bullion Dealers has said that, "In mining, many projects which were not economically viable at gold prices below $400 are now being reactivated and will have a positive impact on gold production in the next few years, enhanced by a growing number of mid-tier producers."
Scott Emerson of Golden Peaks has said that in light of the current correction taking place with gold, "We remain bullish on the yellow metal. Despite the recent price correction the price of gold (June 26, 2006) is 144.50% higher than it was one year ago. The fundamentals have not changed and Company's focus and business plan remain unchanged."
As the correction period continues, the perspective and viewpoint of gold exploration and production companies shift according to the positions they hold in a market which is currently pushing for increased world supplies. On this level, the correction continues to mean different things to varying levels of explorers and producers.
Other Factors Influencing the Price of Gold:
In terms of factors currently driving the price of gold, namely the US dollar and interest rate fluctuations, as well as Iran's alleged nuclear plans, Philip Klapwijk, chairman of GMFS Ltd. and editor of The Outlook for Gold Investment says, "Indeed, looking ahead the only major cloud on the horizon for gold is the ongoing rise in nominal short-term interest rates. However, the rising cost of carry is much less of an issue when investors are confident of double digit gains in gold over the short term."
Ian Telfer, President and CEO of Goldcorp Inc. believes that overall, "the price of gold will continue to rise, however we don't believe that the price of oil is a major factor. We believe a combination of declining mine production, very limited central bank selling, and strong jewelry demand from the new middle classes of China and India are the major reasons for higher prices. We also believe that the US dollar will continue its decline and people around the world will turn to Gold as a storehouse of value."
But amidst the many factors that are beyond our control, investors still hold many of the cards as they eye the opportunity ahead for new gold discoveries. Speaking on the topic of the power investors have to drive change in the markets, Philip Klapwijk furthers that, "Investors have both the capacity and the motive to drive prices to well beyond what would be justified by the normal interplay of gold's supply and demand fundamentals. The probability has grown that we are currently in the middle of a once in a generation rally that will take the metal to a new all-time high."
But for summer, John A. McCluskey, President and CEO of Alamos Gold Inc. (TSX: AGI) has said he expects there will be, "volatility in the short term, as the correction continues. Gold is still primarily trading in an inverse relationship to the USD."
When asked where he thinks the commodity currently stands, McCluskey said, "While we are currently in a correction phase, Q1 06 was very positive for gold producers that were unhedged. While I believe gold is leading higher in the medium to long term, as the secular bull picks up steam, it is very difficult to predict precisely where the price will go at some fixed point in the future."
Chief Executive of the World Gold Council, James Burton agreed with this sentiment, as he reflected that, "It is gratifying that despite significant price volatility in Q1' 06, in almost all categories, buyers are spending more on gold than they were a year ago. Particularly pleasing is the increasing interest from institutional investors with strong evidence that much of the demand is coming from new long term investors who are rediscovering the lasting diversification attributes of holding gold within a portfolio."
As the future for gold unfolds over the upcoming months, fluctuations in the price will determine whether gold will experience an upswing out of the current correction period. At this point, the summer months have much to unveil, in terms of how far outside factors will drive the price of gold in the market. As each quarter files a chapter in the history of gold's ascend toward new levels, in retrospect, there may be much to learn from each individual step made along the way. If there is one thing to be said for the commodity, it is that it holds a reflection on current global circumstances.
Jennifer Lee
Jennifer Lee has a degree in English Literature from the University of British Columbia. She holds a publishing certificate from Simon Fraser University and has worked at both Vancouver and Western Living magazines as an editorial intern. She began her career in business writing and reporting as a writer for DMR Consulting Group, on mergers and acquisitions taking place in the market in 2001. She now works as a freelance writer and editor in British Columbia.
Disclaimer:http://www.InvestorIdeas.com/About/Disclaimer.asp
©Copyright InvestorIdeas 2006
Articles Source - Free Articles
