Gold Price Lower on Europe Expectations

Gold Price Reflects Dampened Expectations in Europe

Gold prices fell to four-week lows, and it seems unlikely that additional stimulus will result from this week’s European summit in Brussels. European finance officials are now working on critical measures to ease financial pressure on Spain and Italy.

Gold rallied to the range of $1,585 per troy ounce earlier in the week, awaiting clarity on how Eurozone leaders will tackle ongoing debt issues. Spot market gold prices are currently trading in the range of $1,552.90 per troy ounce, a slight decline of approximately 1 percent from the previous week.

Warren Gilman, CEO of CEF Holdings, is a long-term believer in gold, but is cautious in the short term. He stated, “gold is having a bit of a paranoia experience at the moment. It can’t quite figure out whether it is a ‘risk-on’ trade or a ‘risk-off’ trade. Traders are frankly missing the point on gold. Gold is a ‘must have’ in the current environment. In the long run, I think gold will ‘come to the floor’ in terms of a risk-on trade and a risk-off trade. Ultimately in this environment, where you have negative real interest rates and you have central banks acquiring gold at historic levels over the last few years, the gold price will eventually rise.”

Company news

Barrick Gold’s (TSX:ABX,NYSE:ABX) claim that Goldcorp‘s (TSX:G,NYSE:GG) acquisition of 70 percent of the Chilean El Morro copper-gold project was “unlawful and ineffective” was dismissed by the Ontario Superior Court of Justice. While Goldcorp is understandably pleased with the ruling, Barrick said in a statement that it will fully evaluate the results and consider its options, including a possible appeal.

Site construction and development activities at El Morro were suspended at the end of April; the suspension is in effect until the Chilean environmental permitting authority corrects certain deficiencies. El Morro, located in the Huasco province in the Atacama region of Northern Chile, holds proven and probable reserves of approximately 5.8 million troy ounces of gold and 4.4 billion pounds of copper.

Barrick Gold appointed Ammar Al-Joundi, former senior vice president for finance at Agnico-Eagle Mines (TSX:AEM), as its chief financial officer, effective July 10. Barrick’s incumbent chief financial officer, Jamie Sokalsky, replaced Aaron Regent as CEO following a surprise management change earlier this month.

Newmont Mining (TSX:NMC,NYSE:NEM) accepted stricter environmental guidelines for its $4.8 billion Conga gold mine in Peru. Peru is the second-largest producer of copper and the sixth-largest gold producer; however, some mining communities suffer from widespread poverty and feel they have not benefited from the country’s economic boom. The Conga mine is the largest mining project ever proposed in Peru.

Conga is partly owned by local miner Buenaventura (NYSE:BVN), and is expected to produce between 580,000 and 680,000 troy ounces of gold per year. The project has been stalled since November because of ongoing protests by community groups concerned about water resources and industrial pollution from the mine.

Investors may note that the influence of courts and governments on material issues for mining companies seems to be increasing. Legal challenges and stricter environmental policies will result in higher costs and time delays that can significantly impact productivity and marginal profitability.

Junior company news

Midas Gold (TSX:MAX) announced the completion of the updated gold resource estimate for its Idaho-based Golden Meadows project.

Terraco Gold (TSXV:TENreported assay results from the first ten core holes of the 2012 drill program at its Almaden project in Washington County, Idaho.

Goldgroup Mining (TSX:GGA) received final assay results from its Caballo Blanco project. The company has stockpiled a supply of mineralized material for any remaining metallurgical test work for the project.

 

Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.

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