By Ian Lyall
August 24 2013, 7:30am
The gold price continued its baby-steps and moved higher in the week just gone with the price of an ounce of the precious metal adding US$14 an ounce, or just over 1% in the last five trading sessions.
The technical analysts see a support level of around US$1,350 (it is currently US$1,375), with a “grouping of multiple, long-term trend lines” pointing to a target of US$1,500 an ounce, according to Michael van Dulken, head of research at Accendo Markets.
He’s ascribing the latest phase of the gold rally (the price is up almost 15% since hitting its nadir in June) to the uncertainty surrounding the ‘tapering’ of America’s fiscal stimulus programme.
Meanwhile, recent figures from the China Gold Association revealed consumption grew by 54% in the first half of the year, which may help support the revival.
However, Citigroup poured the metaphorical bucket of cold water over that particular idea in research issued on Friday.
“We remain unconvinced that this is a sustainable rally,” it said.
“Positive Chinese and Indian first-half demand remains insufficient to counter the significant outflow from physical gold exchange traded funds, while central bank gold buying stuttered in the second-quarter, in part due the dramatic April pull back.
“Whilst Asian consumers seem to prefer gold at lower prices, institutional investors, and to a lesser extent, central banks, still do not.
“With mine supply continuing to increase, the jewellery markets in Asia will have to absorb still more gold in the second half, while the issue of Fed Tapering remains crucial.”
Chinese cash isn’t just going into jewellery. According to Bloomberg it is being ploughed into the companies that produce the metal.
Takeovers and asset purchases by producers based in China and Hong Kong rose to a record US$2.24bn this year, beating last year’s record US$1.96bn, according to Bloomberg.
The data provider cited the falling the price of gold over the last two years (and the consequent crumble in value of Western companies) for this shopping spree.
Whether this will result in a number of takeovers among the juniors across here on AIM remains to be seen.
That said, there has been a revival of sorts among the gold diggers and explorers built around news flow.
This followed environmental approval for the Cascabel project in Ecuador, which paves the way for drilling to start next month.
Finally, who said it is all over for gold miners in Argentina?
Minera IRL (LON:MIRL, TSE:IRL) has shown that it is possible to get financing for the right project – and not just that, it has found local backing for the Don Nicolas property down there in Patagonia.
Its US$80mln financing deal belies the difficult political backdrop that has put the kibosh on interest in what was one of the most exciting emerging postcodes for the precious metal.
That Minera is now little over a year from first gold (Don Nicolas is slated to produce 50,000 ounces of the yellow metal a year), appears to have injected a little life into the share price.
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chow@royalindexuae.com
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