Gold producer Iamgold Corp. recently increased the resource estimate at its new Westwood mine in Quebec, but Blackmont remains unconvinced about the value of the company moving forward.
“Given the still early stage and uncertain economics, we ascribe only a $25/oz value to this project and as such, the resource increase does not materially change our NAV,” Richard Gray, mining analyst with Blackmont, said in a note Tuesday.
The recent discovery of several new high-grade finds helped Iamgold bump up the resource estimate to 3.43 million ounces.
Mr. Gray is “intrigued” that the Toronto-based company’s existing Sadiola mine in Mali may get a new lease on life thanks to a possible deep sulphide project.
“Although we are unconvinced of the economic viability, the deeper potential at Sadiola is intriguing,” he said.
Citing elevated political, technical and financial risk for Iamgold’s development properties and declining production, Mr. Gray is maintaining his “Sell” rating and C$9.25 target price.
Meanwhile, Paolo Lostritto of Wellington West Capital Markets is more optimistic about the company’s prospects. He argues the Rosebel mine in Suriname will boost 2009 production and cash flow.
“However, cash flow and gold production will likely remain a challenge in 2010 until Essakane [in West Africa] start up in the second half of the year,” Mr. Lostritto said in the note.
Mr. Lostritto is also maintaining his “Market Perform” rating while upping the target price to C$14 from C$13.
August gold futures closed up $4.70 at $925.70 today. Prices closed nearer the session high after hitting a fresh five-week low early on today. Short covering and perceived bargain hunting were featured today as the U.S. dollar sold off sharply.
Demand for silver investments is heating up in 2009. “The rise in silver prices has also been largely thanks to a fresh wave of investment demand, as funds and other investors buy into silver futures and physically backed exchange-traded funds (ETFs), ” Reports Commodity Online.
“The growth in investment demand for silver is such that it could account for between one quarter and one fifth of total consumption in 2009. As well as the sharp climb in silver ETF holdings, net long positions — or commitments to buy — in silver on the Comex futures exchange in New York rose last month to the highest since August 2008, suggesting keen speculative interest,” Reports Commodity Online.
Commodity Online continues to say “In addition to its appeal as a proxy for gold, silver is also taking a fresh leg higher from renewed optimism over the outlook for the global economy, which is helping the outlook for industrial metals.”
Something to keep in mind as speculators pour into the investment of silver is “With much of the fresh investment since the start of 2009 having flowed into ETFs, from where it can quickly be re-sold on to the market, and futures, some say prices are vulnerable to a sharp correction if funds decide to off-load their holdings,” Reports Commodity Online.
In our current 8-year bull market, June has seen the lowest return for gold and one of the best times to buy. Gold is one of the best forms of capital that can protect you in a financial Armageddon. That gold was up in 2008 is a reminder of its protective power. How much gold should you have? Continue to accumulate physical gold until you can honestly say you don’t care how many dollars Ben Bernanke prints,” reports BigGold editor Jeff Clark.
Gold closed sharply lower on Monday marking a downside breakout of last week’s narrow trading range. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near-term. If August extends this month’s decline, the reaction low crossing at 882.00 is the next downside target. Closes above the 20-day moving average crossing at 954.10 would signal that a short-term low has been posted. First resistance is the 10-day moving average crossing at 940.00. Second resistance is the 20-day moving average crossing at 954.10. First support is today’s low crossing at 918.30. Second support is the reaction low crossing at 882.00.
The bullish percent index tells us the percentage of gold stocks which currently have a point and figure buy signal. Looking at the charts below it looks as though precious metals are trading at support. I am inclined to think we will get a bounce this week for gold and silver.
Hui:Gold Ratio
When this chart is trending up gold bullion and gold stocks are in favor and rallying. This ratio is currently at a support level which is pointing towards a bounce in the near term. This is a weekly chart so we could be 1-2 weeks away before it shows up on the chart.
HUI – Gold Stocks Index
This is an index of gold stocks. We saw prices breakout and rally in May but now they are testing support. They could go either way quickly from here.
Gold Price Action – GLD Gold Fund
As you can see gold has pulled back from resistance is now at a possible support level. From looking at the HUI:GLD price performance and stochastic indicator at the bottom of the chart which is now turning up, it points to higher prices for gold in the short term.
(Reuters) – Gold fell around 0.8 percent on Monday towards $920 per ounce with dollar strength against a basket of major currencies sapping the appeal of bullion and other commodities priced in the U.S. unit.
Spot gold dropped to $925.35 an ounce at 1041 GMT, having earlier hit a intraday low of $921.30. That compared with $933.80 quoted late on Friday in New York. The price was fixed or set in London earlier on Monday at $924.00.
The dollar gained at the expense of higher-yielders, normally associated with risk seeking behaviour, reflecting investor concern about global growth prospects and jitters ahead of the U.S. Federal Reserve’s rate setting meeting — a factor that was seen supporting gold at the lower levels.
“I think ahead of the FOMC meeting we’ve seen a bit of dollar strength, and technically gold is due to take a bit of a breather,” said Simon Weeks, director, precious metals sales at Scotia Mocatta in London.
“Once gold moved through $930, we took a look downwards to the next support level,” he added.
The Fed is not expected to adjust monetary policy at its meeting on Tuesday, but investors will keep a keen eye on its statement for clues on the economic outlook and progress of its debt buyback programme.
In early June, a weakening dollar and increasing demand for gold-backed funds helped bullion hit a three-month high of $989.80 an ounce. But the dollar has since pared its losses, dulling some of gold’s allure as an alternative investment.
“I am a big time Gold stock bull based on the deflationary depression that I believe has already begun (for those who don’t understand why deflation is good for Gold miners, look here). The stock market is a dangerous place to be right now and there’s no rush to speculate on the upside right now. Patience will be rewarded as the new bear leg down in the stock market that has begun will take even good sectors down with it,” Reports Adam Brochert from the Market Oracle.
Brochert goes on to say “Gold stocks made their secular lows last fall in the Great Panic of 2008 and won’t be making any lower lows, unlike general stocks. I believe the top is in for the major Gold Miner indices like the HUI, XAU and the GDX ETF. Every stock makes its own movements and I am actually bullish right now on Gold royalty company Royal Gold (ticker: RGLD), but I wouldn’t put new money into GDX right now for longer-term investors.”
“Senior Gold stock indices usually begin a correction with a typical “A-B-C” configuration. This may or may not be the final corrective low for the entire correction, as corrections can grind on for months, particularly after a strong bull thrust. These corrections are boring and can be frustrating for those trying to get rich quick, but are a necessary part of any healthy bull market,” Brochert reports.
“Rather than base my analysis on macroeconomic events, which so many try to use to justify different outcomes, I’d rather look at the rich history of the current secular Gold stock bull market for clues. We have entered a seasonally weak period for stocks, including Gold stocks, and now is not the time to be making new senior Gold stock purchases for the longer term in my opinion. This is because I believe better buying opportunities lie ahead,” Brochert reports.
Gold was lower overnight and breaking out to the downside of last week’s trading range. If August extends the overnight decline, the reaction low crossing at 917.00 is the next downside target. Closes above the 20-day moving average crossing at 954.20 would confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 940.40. Second resistance is the 20-day moving average crossing at 954.20. First support is the overnight low crossing at 920.70. Second support is the reaction low crossing at 917.00.
Gold broke down and went into decline, as predicted in the last update posted early this month. At that time our maximum downside target was the strong support in the $880 area, but now there are strong signs that the decline has either run its course, or is close to having done so, and that a breakout to new highs may be close at hand.
On the 6-month chart we can see how the double bearish engulfing pattern at the highs led to gold going into retreat as expected, within a tightly defined downtrend. Although price action shows little sign of the downtrend ending, we can observe several strongly bullish influences that could lead to its ending anytime soon. One is the proximity of the rising 50-day moving average, while another is the bullish alignment of both moving averages, the 50 and 200-day. In addition the price has dropped back into a zone of support, and finally short-term oscillators have neutralized as a result of the reaction, renewing upside potential. Although helpful inasmuch as it enables us to examine recent action in detail, the 6-month chart is useless when it comes to divining the major trend and determining gold’s next big move. To do that we need to refer to longer-term charts.
