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Gold prices received a little reprieve from bad economic conditions as Goldman Sachs cut its gold forecast.
Commenting on gold’s slight rebound, Kitco’s Jim Wyckoff said, “[y]esterday’s price action confirmed that the bears are in near-term technical command. When you see a big price move in a market, many times the following day you’ll see a pause just as traders catch their breath.”
Overall, however, investors can expect gold’s bounce to be short-lived. “We believe a sharp rebound in gold prices is unlikely, ” Goldman Sachs stated.
VTB Capital analyst Andrey Kryuchenkov also weighed in on gold prices, noting that he expects the yellow metal to stay above $1,550 for the time being — unless it can breach the resistance point of $1,584.60.
For the moment, gold is up. It ended Thursday’s session at $1,564 per ounce.
Cyprus won’t be selling gold reserves
Rumors that Cyprus will be selling 400 million euros ($522 million) worth of its gold reserves as part of a financial-rescue plan weighed heavy on the yellow metal this week. Though the Central Bank of Cyprus denied the rumors, the speculation worried market watchers.
The fear is not about the amount of gold to be sold, Matthew Turner, an analyst at Macquarie, explained. Instead, the concern lies in the fact that Cyprus would be “the first euro zone country to have said it will do this for a while.” That raises concerns that other Eurozone members might also consider selling central bank gold reserves as part of their bailouts.
“The decision to sell the gold is a decision to be taken by the board of the Central Bank of Cyprus (CBC). No such thing has been discussed or is in the process of being discussed. There are so many rumors flying about and this is just one of them,” Aliki Stylianou, a spokesperson for the central bank, told CNBC on Thursday.
Is Goldman Sachs losing faith in gold?
Goldman Sachs slashed its price forecast for gold through to 2014 on Wednesday for the second time in 2013, stating that despite troubling economic times, gold prices have remained mostly unchanged, meaning that investors’ desire to hold the yellow metal is waning.
In its report, the bank states, “events since mid-March have finally offered potential catalysts for a rebound in gold prices. And yet, gold prices have remained unfazed by the recent resurgence in Euro area risk aversion and disappointing US economic data.”
Goldman Sachs dropped its three-month target to $1,530 an ounce, down from $1,615; six- and 12-month numbers were also cut, falling from $1,600 and $1,550 to $1,490 and $1,390, respectively.
For the longer term, 2017 and onward, the bank is still pessimistic, with price expectations lingering around $1,200 per troy ounce.
The bank also recommended that clients consider shorting gold.
Meanwhile, at the IMF…
A Kitco Market Nugget report notes that research conducted by the International Monetary Fund (IMF) regarding the commodities supercycle points to the possibility that the bull market that started in 2001 has not yet ended. That is good news for gold.
“According to the study the current commodity cycle shows no sign of exhaustion. This reaffirms our view that while gold prices have eased, they are likely to be supported in part by commodity prices.” said HSBC’s Jim Steel “According to the paper the most recent boom in global economic growth dating from 2001 is unprecedented. Economic growth is also the single most important driver of commodity prices according to the IMF presentation. HSBC macroeconomic forecasts look for strong growth for China and much of the emerging world.”
Company news
A Chilean court suspended work at Barrick Gold’s (TSX:ABX,NYSE:ABX) Pascua Lama mine on April 10, ruling in favor of indigenous communities concerns that the mine threatens their water supply and pollutes glaciers.
Barrick is working to address the environmental concerns on the Chilean side; meanwhile, construction activities in Argentina have not been affected by the suspension. The concern that a permanent ban could signal the end of the project remains as most of Pascua Lama’s reserves lie in Chile.
In a statement, Barrick commented that it is “too early to assess the impact, if any, on the overall capital budget and schedule of the project.”
Shares for Barrick were down 8.65 percent on Wednesday, closing at $24.46.
Junior company news
Logan Resources (TSXV:LGR) increased its mineral resource estimate at its Friday deposit, located at the Idaho gold property in Idaho. The resource is estimated at a grade of 0.45 grams per tonne cut-off and shows an increase in the indicated category to 647,000 ounces of gold at 20.1 meters at 1 g/t gold. The inferred resource estimate has been increased to 590,000 at 20.9 meters at 0.88 g/t gold.
Logan has signed an option and joint venture agreement with Premium Exploration (TSXV:PEM,OTCQX:PMMEF) for the Friday deposit. As per the agreement, Logan can acquire up to 75-percent interest in the deposit.
Orefinders Resources (TSXV:ORX) reported the results from a further five holes that were drilled as part of its phase 1 and ongoing phase 2 diamond drill program at the Mirado project. Each hole intersected significant high-grade and broad lower-grade gold zones.
Highlights include 9.50 meters at 59.2 g/t gold in hole MD13-07, including 1 meter at 559 g/t gold and 6 meters at 6.32 g/t gold in hole MD13-10.
President of Orefinders, Bill Yeomans, stated, “[t]he first phase of drilling clearly demonstrates the bulk tonnage potential for gold mineralization on the property. We are also beginning to recognize an extremely high grade gold component at the Mirado deposit. Bonanza grades have been identified in drill core and at surface along structures that Orefinders now considers to be the high grade feeder zones associated with broad near surface gold mineralization.”
Continental Gold (TSX:CNL,OTCQX:CGOOF) released metallurgical testing results from work being undertaken at the Buriticá project Colombia. As part of the testing it was determined that gravity concentration followed by cyanidation of gravity tails was the preferred method of the recovery process and is to be included in the company’s upcoming Preliminary Feasibility study.
Overall metallurgical recoveries of 95.4 percent and 48.6 percent for gold and silver, respectively were identified for all four 150 kilogram samples. High gold recovery rates were also accomplished using two different testing methods, namely gravity concentration followed by flotation and leaching of the concentrate and gravity concentration followed by Carbon In Leach.
Metals Creek Resources (TSXV:MEK) announced assay results from the Ogden gold project in Timmins, Ontario. The company intersected 49.96 g/t gold over 9 meters, including 434.77 g/t over 1 meter at the Thomas Ogden zone.
Metals Creek CEO, Alexander Stares, comment that “with each drill program, our team is gaining a better understanding of the complex nature of the gold mineralization at the Thomas Ogden Zone. We continue to be impressed with the grade, style and continuity of the gold mineralization. The land package represents an excellent opportunity for Metals Creek and the Thomas Ogden Zone is just one of four known gold zones on the property. The Ogden claims cover eight kilometers of strike length of the Porcupine-Destor Break between Goldcorp’s Dome Mine and Lake Shore Gold’s West Timmins development project, most of which has seen very limited exploration. In excess of 40 million ounces of gold has been produced within ten kilometers of our drilling.”
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.