Gold Investing News

By Dave Brown - Exclusive to GoldInvestingNews.com

Friday marked the 35th anniversary of the death of the famous Austrian economist, Ludwig Von Mises, who once wrote, “do the American voters know that the unprecedented improvement in their standard of living that the last hundred years brought was the result of the steady rise in the per-head quota of capital invested? Do they realize that every measure leading to capital decumulation jeopardizes their prosperity? “.  The irony of these rhetorical questions, defied the markets last week as many traders are now wishing that a more rational trading pattern and sound economic framework will gain a foothold as the week left observers mystified and horrified.

Driven by rumors that global markets may close for several days to allow governments to take remedial action, there was a flight for cash as the US dollar rose in value and equities plummeted on Friday.  The day concluded the worst week in the 112-year history of the Dow Jones Industrial index with the most turbulent trading session with a swing of 1019 points, as the final flourish of selling resulted in the market losing 1.5 percent of its value.  The expectation is that the regulators may close the markets down for five days and people are not going to have access to funds.  Frank McGhee, the head dealer at Integrated Brokerage Services, “the world is going to cash.  Investors are selling gold to raise dollars. There’s just massive selling across the board.”  Some analysts are stating that physical demand for gold will remain strong should the credit crisis persist, and that the speculative community continues to maintain a considerable long position in gold, it would seem as a hedge against further corrosion in market sentiment.  At the end of Friday’s close the spot price of gold was USD $849.85.

Company News

On Friday, Scotia Capital Markets metals team released a bearish industry comment suggesting that the third quarter will be extremely difficult for many producers with strong base metal by-product credits.  The report focused on adjusting commodity price forecasts down by large amounts due to the expectation that the credit crisis is likely to result in a more severe cyclical downturn.  One of the largest changes to price targets was for IAMGOLD Corporation (TSX: IMG, NYSE: IAG), dropping by 5 percent as a result of exposure to the ferroniobium market.

On Wednesday, IAMGOLD issued a press release announcing that it has entered into a lock-up agreement for a 2.4 percent of Euro Ressources S.A.  As a relatively low cost producer, it would seem that IAMGOLD is looking to expand and maximize its cash flow and leverage its clean balance sheet, low capital spending programs and manageable debt service levels, to strengthen its competitive position as the market turns up opportunities.

IAMGOLD is a mid-tier gold producer, and is engaged in the exploration and development of mineral resource properties in the North West Territories, Quebec, Suriname, Mali, Ghana, Botswana, French Guiana, Ecuador, Tanzania and Peru.  The company is headquartered in Toronto, and has a market capitalization of USD $1.1 B.  The share price for IAMGOLD Corporation traded on Friday finishing at USD $3.93, a decline of 21.2 percent from the previous day’s close.   The current valuation level of the company implies a 55.1 percent discount to the updated Scotia Capital Markets’ 1 year price target based on downgraded assumptions for ferroniobium due to a softening steel market.