Gold Investing News

By Kishori Krishnan - Exclusive to Gold Investing News

Stock markets are down and so is the price of the yellow metal. Gold fell for the second day in Asia, extending a monthly drop that may become the worst in more than 25 years. The reasons being cited - a stronger dollar and decline in crude oil. 

Gold has tumbled by 16 per cent this month, the largest plunge since February 1983,   according to Bloomberg data.  “The gold price moved lower, influenced by a firmer U.S. dollar against the euro and the easing in oil prices,” David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney, said in a report.  

The only place where gold shone in its appeal as an alternative asset was India, where investors, running for cover from the global meltdown, realized they had one resort left. The metal’s lustre was back this Diwali with jewelers witnessing brisk business during the festive season. Consumers lined up to encash the dip in price, which helped buoy demand for the metal. 

Across the world, bullion continued to be under pressure as global interest-rate cuts were announced. The Federal Reserve has provided $120 billion to South Korea, Singapore, Mexico and Brazil to spur lending in emerging markets. Central banks in the US, China, Taiwan and Hong Kong cut borrowing costs this week. 

Given the fact that the US dollar has gained 11 per cent against the euro since the collapse of Lehman Brothers Holdings Inc. on September 15, the precious metal has been see-sawing across markets. Demand is up for some, down for others, and prices are struggling to find their way amid the market volatility. One thing is for certain: they are attracting attention. 

SPDR Gold Shares is down 16.9 per cent in the last month, while the S&P 500 is down 15.9 per cent. Gold is generally seen as a safe haven, so investors run for cover with the metal in down markets. But a strengthening dollar has turned the tables on that thinking for the time being, as gold typically moves opposite the greenback. 

World gold council unperturbed   

In India, the World Gold Council (WGC) has indicated that the July-September quarter gold sales would be robust compared to the previous year. The higher sales in the last quarter could be attributed to the sudden crash in gold prices in July that led to increased imports in August and September, and hoarding by stockists.  

In 2007, India imported nearly 800 tone of gold on very good demand for jewelry and also because of investment in bars. However, the combined demand was abysmal in the first six months of 2008, down by nearly 50 per cent to 264 tones, with the price hitting an all-time high in March.

Company News

Toronto-based High River Gold Mines Ltd. (TSX:HRG) has said that it has achieved commercial production at its Berezitovy Gold Mine in Russia, and that a re-start of the mill at the Taparko-Bouroum Gold Mine is planned, early November. 

Reports emanating from Deccan Gold Mines in India, (BSE: DECNGOLD) the first private sector gold exploration company to be listed on the Indian bourses, suggest that investment bankers in the UK and Canada are keen to follow gold exploration projects in India. “Typically a new project needs an investment of $5 million and despite the current market slowdown, we have been approached by four international gold mining houses to fast track some of our projects,” said Sandeep Lakhwara, managing director of the company.

NYSE-quoted Peruvian miner, has reported a small increase in 3Q profits on gold production and higher precious metals price, but costs are higher. Compania de Minas Buenaventura SA, (NYSE: BVN)  the Peruvian miner, reported that its third-quarter net profit rose nearly 1 per cent. Net profit increased to $100.6 million from $99.9 million in the same quarter a year earlier. Total revenue gained 6 per cent to $207.6 million from $195.8 million. The average price it received for gold, including Yanacocha, one of Latin America’s largest gold mines, was up 26 per cent to $875 an ounce in the third quarter from a year ago.