Pushing the Gold Milestone

9th September 2009

Over the past year many economists have cited the $1000 mark as a milestone for the price of gold.

Over the past few days we’ve seen the price of gold push to the $990s. Yesterday this milestone was breached.

One of the main reasons why we have seen a very recent push to the milestone is because the US citizens have returned to the markets from their holiday season. Prior to this gold was lingering around the $930s. It was, however indicating something called an ascending triangle pattern …

The precious metal surged to $1007.70 an ounce on the London Bullion Market.

The price of gold has risen by 14% this year and is now within sight of its record high of $1032.70 reached 18 months ago.

The Gold Bull Run

Indeed over the past month we’ve seen gold’s ascending triangle breaking out into new ground, pushing prices higher. A look at the chart below shows the market testing consistent highs while experiencing higher lows, forming a triangle which chartists assume is indicative that a breakout will happen.

(note to see a short video explaining ascending triangles click here).

As you can see from the graph below [To see a larger version click here ] the bull market on gold has been running since about 2001 having bottomed in 1999. Every year from 2002 onwards gold made new highs.

How closely should we pay attention to this data?

Commodity bull markets are typically expected to run for 18 years which leaves us with another 10 years until this bull runs out of steam… this is a long way away.

Gold has been trading inflated prices due to the US and Western central banks quantitative easing program, flooding the market and hyping inflation worries for investors. This is a big headache that will not go away soon. We look to the near future and see inflation, maybe even a 1920s style German hyperinflation.

Gold prices have certainly been inflated by the fear of inflation but when people panic they put faith in things meant to be solid. A few years ago people would say that about banks. Now gold is the common thought. As fiat (AKA paper) money’s value recedes a gold standard which was once used prior 1971, could be seen to offer support. In this case the price of gold will continue to maintain it’s strength.

The time this would take to evolve is huge and we don’t know if this will happen… the US dollar, with all it’s ugliness is still holding value. Movements in the dollar is the most potent indicator for gold going forward. The higher the price rises the more cautious we become. Some analysts are calling the bottom of the dollar already which would singify it’s revival and gold’s demise. If however you think inflation will happen then the price of gold today will be a fraction of what it will be.

Gold Mining watch

Over the last week gold mining stocks across the board have had their share prices inflate as the price of gold has risen.

Peter Hambro Mining Company

We look at Peter Hambro’s mining company, Russia’s 3rd largest gold miner company posted a 5 fold increase in net profit in the first half of the year. That’s after selling 76% more gold and buying back bonds at a profit. They are on target to produce their target of 500 000 ounces this year.

Click here to view Peter Hambro speaking on CNBC.

Peter Hambro also announced recently that the company intends to change the name of the company to Petropavlovsk to reflect its Russian influence. Having bought out the remainder of it’s corporate bonds the company willstand on it’s own financial legs. A company without debt, which specialises in iron ore and gold mining, has influential members in countries like Russia which contains a potentially staggering amount of mineral resources. This looks like it could weather the financial storm and come out on top.

Click here to see Peter Hambro Mining Company’s share price.

Centamin Egypt Limited

We move further east to Centamin Egypt Limited, the Aim listed penny shares company that operates the Sukari Gold Project in Egypt. Centamin is a mineral exploration and development company that has been actively exploring in Egypt since 1995. Their prinicipal asset is the aforementione Sukari Gold Project.

The popular mythology behind Centamin Egypt goes that it was WA geologist Sami El-Raghy who came across the ancient papyrus map dating back to 1200BC hanging in an Egyptian museum.

That map, believed to be the oldest of its kind, included the location of 1300 historic gold mines and inspired Mr El-Raghy to hunt for some treasure of his own.

In June, Centamin poured first gold from its Sukari mine in Egypt’s eastern desert, where it has established a 9.91 million-ounce resource.

By the end of 2009 it hopes to have increased production to an annualised rate of 200,000oz.

The company has $70m of cash, no debt and no hedging.

Click here to see Centamin Egypt Limited share price.

Ivanhoe Mines

Still further east, after the parliament of Mongolia decided to revoke a draconian windfall tax it had placed on sales of copper and gold [See here for full details]. RIO Tinto and its partner Ivanhoe Mines are expected to sign an agreement with the Mongolian government this month to finally pave the way for the development of the $US3 billion ($3.6bn) Oyu Tolgoi copper and gold mine. The Mongolian government owns 34 percent of Ivanhoe Mines company which owns the Oyu Tolgoi mine.

Rio Tinto holds a 9.95 per cent stake after making an initial $US303 million investment in 2006.

Rio has agreed to invest another $US388m for a further 9.95 per cent at the conclusion of a long-term investment agreement, with an option to eventually increase the investment to $US2.3 billion for a 46.65 per cent stake.

For the current share price for Ivanhoe mines click here

Other gold mining news:

Eldorado Gold Corp. (TSX:ELD). Miner. Up to $12.15. The Vancouver miner’s shares continued their ascent following the announcement last week of a stock-swap deal to buy the rest of Australia’s Sino Gold Mining Ltd. The friendly, $2-billion deal expands the Canadian international miner’s presence in China, one of the world’s major gold mining countries.

South African gold company Gold Fields has sold its shareholding in Canada’s Eldorado Gold for C$323-million

That’s all for this week,

Best Regards,

Digger
Gold Price Today

Important

Information in Gold Price Today is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision.