Precious Metals

Gold prices surged about 2 percent during the week as an increase in Spanish borrowing costs and uncertainty ahead of this weekend’s Greek elections combined with weak US data.

Gold prices climbed over four consecutive trading sessions this week as an increase in Spanish borrowing costs and uncertainty ahead of this weekend’s Greek elections intensified risk aversionPrices rose about 2 percent over the week, with spot market gold prices trading in the range of $1,619.60 per troy ounce.

In the United States, gold prices were supported by rekindled speculation about further quantitative easing following the news that last month, US wholesale prices dropped and retail sales were down for a second straight month. The retail sales report is closely monitored by both traders and economists and has often increased volatility in commodity and equity markets.

The report is considered a predictor of inflationary pressure and of the potential for Federal Reserve policy shifts, depending on the direction of underlying trends and macroeconomic circumstances. The data it provides is also of interest because it is released in a very timely method, only two weeks after month end, and receives robust press coverage and complete disclosure of component sectors. The release includes a spreadsheet of historical data that can be used to examine trends that relate closely to the average consumer. These latest broad economic indications are now included alongside employment and manufacturing data, and highlight a slowdown in US economic recovery.

Gold continues to be a store of real value

Jim Rogers, chairman of Rogers Holdings, indicated his outlook for commodities and China, stating, “I own commodities because there are serious supply problems facing the world in commodities. If the world economy gets better, wherever it gets better prices are going to get higher because of the shortages. If the world economy does not get better I would rather own commodities because governments are going to print money. They will print more money, and throughout history when governments have debased currencies, when they have printed money, the way to protect yourself and to make money is to own real assets.”

Investors will note that gold and precious metals have historically been linked as real assets and as well-established methods of storing value.

China slowing the pace of decline

Jeffrey Kleintop, chief market strategist at LPL Financial, also offered commentary on the situation in China, commenting, “based on what we have seen, China’s moves have been effective at slowing the pace of decline. They are crude policy tools, but they have been remarkably effective. It looks to us that China is bottoming out here and we may actually begin to see renewed growth later this year. Given the backdrop and everything else we have seen, it probably makes more sense to buy gold and oil rather than stocks.”

Company news

Kinross Gold (TSX:K,NYSE:KGC) said production resumed on June 9 at its Tasiast gold mine in Mauritania in West Africa as workers returned following a four-day strike. The company indicated last week that about 600 workers had walked off the job, halting mining and processing activity.

Junior company news

BonTerra Resources (TSXV:BTR) announced a gold resource estimate of 492,000 ounces at its Quebec-based Eastern Extension property.

Geologix Explorations (TSX:GIX,OTCQX:GIXEF,FWB:GF6) reported that results from a gold- and silver-enriched zone were identified by extensive rock sampling.

Goldgroup Mining (TSX:GGA) announced its latest operational and management updates after electing a new board at its recent AGM and finishing the next stage of permitting at its flagship Caballo Blanco project.


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


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