Gold Investing News

By Dave Brown - Exclusive to GoldInvestingNews.com

Following the wake of the announcement from the US Federal Reserve last week, fireworks are much more likely to be observed on main street rather than Wall Street, for both capital and commodities markets. Despite the reduced activity in the markets, strategists and politicians are still working hard towards resolving important issues and mandates which promise to have significant economic implications.

The US treasury secretary Henry Paulson is in Europe this week discussing the important issues of the day including food and commodity prices. On Monday, Mr. Paulson was in Germany conferring on solutions to help control world food price inflation with German Chancellor Angela Merkel and Economy Minister Michael Glos. Mr. Paulson has consistently denied that the weaker U.S. dollar and futures market speculation were significant factors for increased oil prices, instead contending that supply and demand fundamentals are at the cornerstone for the escalating valuations. Later this week, he is expected to reveal more details in a presentation in London about accelerated plans for the Federal Reserve to assume a larger regulatory role in maintaining financial system stability. After a meeting with Russian leaders he told reporters “I will be expanding on the role of the Fed as a macro stability regulator to look across the entire financial system, but will be emphasizing how this just has to be paired with market discipline”.

Concerns Mount

The higher prices in food and energy are being felt across the world, affecting entire nations and even the elite members of royal families. The International Monetary Fund stands ready to help, as a report released today shows that scores of countries are facing dire fiscal woes, rampant inflation and deepening poverty. IMF Managing Director Dominique Strauss-Kahn, said at the release, “if food prices rise further and oil prices stay the same, some governments will no longer be able to feed their people and at the same time maintain stability in their economies”. According to Bloomberg news reporter, Kitty Donaldson, everyone is feeling these effects as even the budget for Queen Elizabeth II rose 6.1% in the 12 months ended March.

The Golden Hedge

Global Portfolio Strategist of BMO Financial Group, Donald Coxe, has often highlighted the increased attraction that gold and gold stocks have each week that global food and fuel costs rise along with writedowns on bank balance sheets. Mr. Coxe developed a strong reputation for his analysis over the years, and his investment recommendations have been useful particularly with investors attempting to make sense, of the seemingly ubiquitous international financial crisis news flow.

More positive sentiments for gold investors are echoed by industry observer, Boris Sobolev, suggesting that, “gold is still way below its inflation adjusted peak set in 1980 and is also one of the weakest performers among hard assets. All this leads us to believe that the most powerful run in gold is still ahead.” The spot price of gold today closed today at USD $ 939.70 per troy ounce which represents a 1.6% gain from Monday’s closing price.

Company News

DBS Group Analyst, Helen Wang placed renewed optimism for the Chinese gold sector, pointing to the limited downside risk for gold prices following the correlation analysis of gold/oil and gold/US dollar historical data, “Zijin Mining is our top pick in the sector. Although the company is currently expanding its metal operations from gold to include copper, iron ore and zinc, our recent meeting with the management indicates that in the next 2-3 years, its priority would be gold mine development to maintain gold as the major cash and earnings contributor”. Zijin Mining Group (HSI: 2899) is China’s top gold producer and announced earlier in June that it will buy another 13% stakes in Inner-Mongolia based Wulatehouqi Zijin Mining Co, boosting its total holding in the company to 73%.

Zijin Mining Group closed the day trading at HKD 6.63 which is up almost 63% from its August 17closing price, the company’s 52 week low. The company produces gold bullion, copper cathodes, and zinc bullion, as well as gold, copper, zinc, and iron concentrates. It is also involved in geological and technical mining consultancy services.