Gold Investing News

By Kishori Krishnan - Exclusive to Gold Investing News

With the price of oil falling more than 60 per cent from a peak in July, Iran has converted its financial reserves into gold to avoid future problems. Iran, the world’s fourth-largest oil producer, is facing declining revenue from its oil exports after crude prices tumbled. The country is also under U.N. and U.S. sanctions over its disputed nuclear program.

An adviser to President Mahmoud Ahmadinejad was quoted by Reuters as saying, “With the plans of the presidency…the country’s money reserves were changed into gold, so that we wouldn’t be faced with many problems in the future.”

Before oil prices plunged 60 per cent from a peak of $147 per barrel in July, Iran made windfall gains from its crude exports and in April, estimated its foreign exchange reserves at about $80 billion.

Elsewhere in New York, as oil and other commodities closed flat, the yellow metal made its biggest one-day gain since mid-September. Silver and platinum also surged. Gold futures in New York rose $37.50, or 5.3 per cent, to $742.40 an ounce.

On Thursday, gold futures in New York closed at $704.90 an ounce, their lowest price since September 2007 and down from above $900 in early October. There were many reasons cited for the fall. While analysts said the rally had the scent of “short covering” by traders who had bet, correctly, that gold would drop in recent weeks with the general meltdown in commodities, others like Jon Nadler, a veteran metals analyst at Kitco Inc. in Montreal, said there also were rumors Friday, that a hedge fund had put in a “sizable” order for gold.

Some also pointed out that the metal could be getting a boost from fears that the International Economic Summit would disappoint investors hoping for a concerted effort to halt the global economy’s slide. Nadler maintained that gold could fall to between $620 and $660 an ounce as the economy worsened, inflation fears continued to ebb and demand for raw materials continued to wane.

Analysts at Deutsche Bank in London said that with the dollar at its current level, a fair price for gold would be about $600.

Bill O’Neill, a partner at commodities trading firm Logic Advisors in Upper Saddle River, N.J., said the major obstacle to a sustained rally in gold was that many hedge funds continued to dump commodity investments to meet redemption demands from panicked clients, or just to raise cash for safety’s sake.

Marriage season

In India, gold lured buyers as retail consumers rushed in to take advantage of the lower prices ahead of the marriage season. Buying activity in gold picked up as jewelry fabricators indulged in enlarging their position to meet the ongoing demand. Market men said a steep rise in gold prices in overseas markets and rising demand among jewelers for the ongoing marriage season mainly pushed up the prices.

The December contract on the Multi Commodity Exchange had fallen about Rs 2,700 per 10 grams from its peak of Rs 14,320 hit on Oct. 10. The contract had fallen about Rs 100 rupees more Friday on weaker crude oil. With demand rising for the peak season, starting this month, gold will continue to hold sway till early 2009, for the entire duration of the marriage season.

Good pickings

At the RBC gold conference in London, Alex Davidson, an official with Barrick Gold Corp (TSX: ABX, NYSE: ABX) said they would press on with three new mine projects that would add nearly two  million ounces of production a year, but said the firm is reviewing the viability of other potential developments.

Barrick, the world’s biggest gold producer, is in a healthy financial position, with $1.7 billion of cash and $1.5 billion in undrawn credit available.

Davidson was of the belief that gold firms, hit by the credit crisis and weak gold prices, were keen for mergers with bigger rivals, but “consolidation will likely have to wait until volatile share prices stabilize. It’s hard to convince someone to accept a 30 per cent premium when their stock price is 90 per cent down,” he added.

Chief executive Kevin McArthur of Goldcorp Inc. (TSX: G) underscored that the downturn had opened up potential takeover opportunities, “but not many are top quality. A lot of companies have come knocking because a lot of juniors are in tough shape right now,” he said. Goldcorp has operations in Canada and Latin America and is developing its key Penasquito project in Mexico.

Chief Executive Mark Bristow of Randgold Resources (LSE: RRS, NASDAQ: Gold) said he was also looking at opportunities, but was more interested in early-stage, longer-term projects since the firm’s new mines being developed will ramp up output in the medium term.

Company News

Venezuela is to take over the Las Cristinas gold project. Canadian miner Crystallex does not own this mine, the mine is administered by the Venezuelan government entity, CVG. Crystallex is under contract to operate the mine. Rodolfo Sanz, head of the Venezuelan mining entity, Mibam said on a radio broadcast recently, “For 2009, its estimated the exploiting of the Las Cristinas mine, which was in the hands of the transnational corporation Cristalex, … will be restored and operated under the state administration.”

Campbell Resources Inc. (TSX: CCH) announced financial results for the third quarter ended September 30, 2008. During the period, Campbell operations produced 64,572 tons of ore yielding 2,080 ounces of gold and 2,343,188 pounds of copper. In the third quarter of 2007, 70,223 tons of ore were milled, yielding 5,030 ounces of gold and 1,625,926 pounds of copper. Production was slowed in August because of equipment and liquidity issues.

In the third quarter of 2008, the company said the average sale price for gold was $930 per ounce compared to $682 in the same period of 2007. Net metal sales were down for the third quarter of 2008 at $6.0 million compared to $12.8 million for the same period last year.