Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: lorne who wrote (63199)	2/1/2001 8:36:08 PM
From: BGraham	Read Replies (4) \| Respond to of 116756

Yorkton's Gold Outlook ..... YORKTON SECURITIES MINING RESEARCH January 30, 2001 Art Ettlinger, Ph.D., P. Geo, Calgary, AB. Where We Stand on Gold Over the past few months we have shifted our position on gold from outright bullishness to that of a near-term bear. Investor fatigue with gold shares that do not move when exploration progress is announced and developing opportunities in the base and platinum group metals are strong motivators for our change in attitude. From a technical perspective, the twenty-year downtrend in bullion price has been relentless with no signs of abating in the near term. Indeed, the brightest outlook for gold comes from its role as commodity and supply and demand fundamentals. There has been persistent shortfalls in new mine production versus consumption which will eventually work in favour of the commodity price. The timing for this is impossible to predict because of the large overhang of approximately 30,500 tonnes held by the official sector, namely central banks, and due to the continued hedging of gold by gold mining companies. For nearly four years we have recommended speculative investors take a buy and hold approach on selected gold exploration projects. These were viewed as being exceptional in terms of discovery potential and corporate management. Time horizons for speculative investors however, have now diminished beyond the time it takes to complete the typical Phase I exploration program, largely because of the rapid returns experienced during the dot.com bull market. Consequently, the gradual return of speculative interest we are now seeing in mining is largely focused on the base and platinum group metals, both of which have strong and compelling fundaments. There is no clearer evidence of this then in the current prices for palladium and platinum, which are US$1,050.00 and US$603.50 per ounce, respectively. In base metals, commodities such as aluminum, nickel and zinc are all at or near decade lows in LME inventory. While much recent media attention has focused on a potential crisis in copper supply, amplified by the CEO of Freeport McMoRan Copper and Gold in a televised interview a couple of weeks ago. The first chart below shows the 20-year price history of gold. Volatility in the commodity price has been steadily declining since the late 1980’s and the onset of the remarkable economic expansion led by the United States during the 1990’s. It is our view that gold will first test the 20-year support line indicated below before a new bull market in this commodity begins. This means that gold will drop precipitously to the $225-$235 per ounce level in testing this support. We don’t know when this will happen, but when it does it will be quick and mining companies will not have time to respond, as the price will begin to recover sharply. The second chart below illustrates the supply deficit, in tonnes per year, between new mine production and consumption during the 1990’s. During this period, there was a cumulative deficit in new production of approximately 12,700 tonnes. This is roughly 40% of the overhang in central bank vaults, a not inconsequential amount. In summary, we have changed our near-term view on gold. Because of the strong 20-year downtrend in gold price there is too much opportunity cost in over-speculating in gold for now. The rush to platinum group metals in Ontario and Quebec, and the consistent interest we are seeing in base metals gives too many opportunities for our clients to profit in these non-gold sectors. Eventually, new discoveries will be made in these commodities which the market will amply reward. New gold discoveries however, such as we’ve witnessed in Guatemala with Francisco Gold and Radius Explorations, show muted market response. The share price gains realized upon announcement of these two discoveries are not commensurate with the risks involved in speculating in junior mining companies. ADE, Calgary, AB January 30, 2001