Surprising Gold Market Boosts Mining Stocks

They expected its price to continue drifting lower because of the mild inflation outlook and growing bullion production.

``Everybody assumed it would just keep going down and down and down. But it didn't,'' said Frederic S. Bogart, head of precious metals for the Republic National Bank of New York.

Instead, gold bullion has rallied strongly since bottoming out at $360 an ounce in September, sending volatile mining stocks soaring.

The group is up about 35 percent since this summer and should advance further, according to Vahid Fathi, an analyst with Prescott, Ball & Turben Inc.

``If gold is in a bull market, as we believe it is for the first time in several years, the reward in these stocks could be subtantially higher,'' he said.

Market participants sa a key test of the rally's strength began last week as gold passed $400 an ounce, a level it previously saw in January on the way down from its recent high of just over $500 in 1987.

If the rally propels gold well above $400, buyers' enthusiasm is expected to swell.

``There are a lot of people who invest in this area who are still on the sidelines,'' said Marc J. Loew, manager of Shearson Lehman Hutton Inc.'s SLH Precious Metals Portfolio. ``Breaking the psychological barrier of $400 gold is what's going to bring them in.''

What is the best way to participate in the rally?

For investors who can tolerate risk, mining stocks carry the biggest potential gains. Their earnings and share prices are highly sensitive to gold prices.

``For example,'' said Fathi, ``if bullion goes up 10 percent, you shouldn't be surprised to see a 20 percent move in the price of gold mining shares.''

Fathi recommends shares in large, efficient mining companies with high production growth. One of his favorites, the American Barrick Resources Corp., has expanded production by about 40 percent this year.

The company's bottom line has also benefited from forward sales of gold that locked in an average price of more than $400 an ounce for its 1989 production.

But Fathi still questions whether the gains in gold shares have been sufficient to compensate for the volatility and risks.

To reduce risks, mutual funds provide diversification. Laurie Kaplan, an analyst for Morningstar Inc., a mutual fund rating service, said the three dozen gold-oriented funds offer a wide range of risk levels.

``The first thing the investors have to figure out is what kind of exposure they want, how aggressive they want to be,'' Kaplan said.

Most volatile, she said, are the ``pure play'' funds that stay fully invested in gold shares whatever the outlook for bullion prices.

The higher their concentration in small mining company stocks, the greater their volatility, Kaplan said.

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Gold Mining Loses Its Shine on Rising Costs Zz Gold Fields Chief Calls for Collective Efforts to Save Industry

THE GOLD mining sector was "under water" and its troubles, with so many factors weighing against it, were just beginning, Gold Fields chief executive Nick Holland said last week.

"As of today, gold is at $1 300 [R13 000] an ounce and the gold industry is under water. The global gold industry is under water. The platinum group metals industry in this country is under water."

According to Holland, the HSBC global mining index has lost 29 percent since the beginning of 2010, while the Dow Jones industrial average is up 47 percent and the FTSE 100 index has risen 22 percent. Gold rose 3 percent to fix at $1 369.25 in London on Friday.

Mining investments were under threat as costs rose and the industry was in crisis in South Africa and other mining jurisdictions, Holland added.

"It doesn't end there either, because existing operations are also being cut back. I think every week now you're reading about a mine that has cut back jobs, rationalised its operations, or shrunk it. And you're going to see more. We're not at the end of it. I think we're at the end of the beginning."

Earlier this month, AngloGold Ashanti, the third-biggest gold producer, said it would cut 40 percent of its 2 000 senior managers worldwide.

Sibanye Gold, the company which was spun off from Gold Fields in January, has plans to cut jobs at its Beatrix West section following a fire and subsequent shaft closures.

Village Main Reef retrenched staff at Buffelsfontein and subsequently pulled the plug on the mine, and took a R469 million write-down on the Blyvooruitzicht mine, to which it halted funding.

Gold producers have reduced capital expenditure, restructured their operations and cut thousands of jobs.

Holland added that costs had increased by 12 percent a year as mines were getting deeper, while at the same time yields had decreased.

"That means you double your costs every four years. That's what you're looking at over here. At the same time yields are going down.

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Mining Battle Lines Drawn Zz Gold Mines Set for Strike after Talks Fail

Rumblings of lockouts by gold sector employers and resolutions to strike by trade unions culminated in a firm commitment to do battle by both parties as the deadline for a wage deal expired at noon yesterday.

"This is it. This is our final offer, we cannot afford an increase," Harmony Gold chief executive Graham Briggs told a press conference hosted by the Chamber of Mines yesterday.

The industry's final stand includes insisting on a collective bargaining forum and not negotiating or settling with unions at either company or mine level.

Briggs said reaching different settlements would probably fuel inter-union rivalry and incite violence.

Across the divide, the National Union of Mineworkers (NUM) said it rejected "with contempt" the final pay offer of a 6.5 percent wage increase linked to a profit share scheme as part of a two-year wage agreement.

NUM tabled demands for 60 percent wage increments at entry-level while the Association of Mineworkers and Construction Union (Amcu) asked for a 120 percent increment. They have not budged, while employers started at 5.5 percent.

"Unions that are expecting these settlements will be disappointed," Briggs added, referring to the fact that there would not be different settlement for bitter rivals NUM and Amcu.

The chamber represents seven gold mining companies in the negotiations: Sibanye Gold, Harmony Gold, Gold Fields, AngloGold Ashanti, Evander Gold, Village Main Reef and Rand Uranium.

"By tomorrow [today] we should know what the consensus is from our members," NUM spokesman Lesiba Seshoka said. "If they want to strike, we will send a notice of strike action to the Chamber of Mines, but we have to look at other avenues of engagement."

Amcu treasurer Jimmy Gama said the union would stick to its demand and consult members on whether to strike. "We cannot be told by the employers, we need to settle on the same settlement. The final offer is a joke. I don't know what they are trying to achieve by being stubborn. They can't blame workers for not accepting the offer, they need to blame themselves for being stubborn".

The parties have exhausted all avenues as the mediation process, led by the Commission for Conciliation, Mediation and Arbitration, failed in the third round of talks.

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How GOLD Is the Perfect Insurance from Stormy Stockmarkets

IN TIMES of economic uncertainty, investors have always turned to gold.

It is renowned as a storer of value, the one asset that will consistently ride out soaring prices and volatile stockmarkets. Unlike almost any other commodity, its price isn't affected by inflation and is not linked to shares.

And if fears over the Chinese economy, a drop in growth of the emerging economies, or prolonged periods of low rates in the U.S. are realised, it could soon be the asset of choice for investors again.

If you own it already -- whether through a fund or because you've bought jewellery or a gold bar as an investment -- then you're holding an asset that should ride out the good times and the bad.

Currently, though, with the economies of many countries performing well and fears of deflation in the UK, savers have been put off it.

In the midst of the financial crisis in 2011, the price of gold soared to a record high, eventually hitting more than $1,900 an ounce. Today, it stands at around $1,176.

That drop has pummelled gold funds, which are down as much as 70 pc over the past three years.

However, when you invest in gold you need to remember that it isn't about growing your money -- it's about protecting it. It works as aabout protecting it. It works as a kind of insurance and, as with any insurance, there is a cost to owning it: gold doesn't pay interest or a dividend, and the money you hold in it is missing out on returns you could get elsewhere.

Figures from BullionVault show that a saver with 10pc of their cash in gold and the rest split between equities and bonds will miss out on the big peaks in the market when times are good. Their average annual return from 1975 to 2014 would be 13.7pc.

For a saver with no gold, that rises to a slightly higher 14.2 pc.

But the investor with the gold would fare better in bad years. In the worst year over that period, they would lose 7.6pc of their money, whereas the investor with no gold would be down 13.2 pc.

The dilemma is whether it is worth missing out in the good years to have the reassurance that you'll limit how much you lose in a bad year.

Laith Khalaf, senior investment analyst at Hargreaves Lansdown, says: 'The events which drive demand for gold are by their nature unpredictable, but it is difficult to see a recurrence of the perfect storm of low interest rates, currency debasement and turmoil in stock markets which propelled it to its 2011 high.' The prospects for gold largely hinge on what the U.S. Federal Reserve does next -- if interest rates go up, it's likely the price of the metal will come down.

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GOLD FEVER ; Going for the Gold a Labor of Love for W.Va. Prospectors

HILLSVILLE, Va. - In a state far better known for coal mining than gold mining, more than 1,000 West Virginians still feel the urge to try their hand at finding the elusive yellow metal in the bottoms of their gold pans.

Two years ago, West Virginia lacked a single chapter of the Gold Prospectors Association of America, the nation's largest recreational gold-seeking organization. Today, there are four West Virginia GPAA chapters, with a total of at least 1,040 members statewide.

"I think the television shows had a lot to do with it," said Dave Kessler, president of the Nitro chapter of the GPAA, referring to a recent bumper crop of "reality" prospecting shows on basic cable, including the Discovery Channel's "Gold Rush Alaska" and "Jungle Gold," the History Channel's "Bamazon," the Animal Planet's "Ice Cold Gold," and the Outdoor Channel's "Gold Fever."

The price of gold, which peaked at $1,920 an ounce in 2011 and remains above $1,300, may also have been a factor, Kessler said.

"Once people get out and give it a try, they realize how fun it can be," Kessler said. "It's a great way to get outside and have fun digging in the creek with your kids. If you find a little gold, that's icing on the cake."

On a recent Saturday, members of the Nitro and newly formed Smithville, Ritchie County, chapters of the GPAA took part in a prospecting outing hosted by the Hillsville/Southwest Virginia chapter on private land bisected by a small creek in Patrick County, Va.

The event took place about 170 miles south of Charleston, making it a slightly shorter drive than is needed to reach two of the GPAA's three nearest leased prospecting properties, all located along rivers in Ohio. The nearest GPAA property encompasses a stretch of the Scioto River just north of Portsmouth, Ohio, about 100 miles northwest of Charleston.

At the Ohio GPAA sites, prospectors pan, sluice and dredge for small quantities of fine flour gold, believed to have been carried into the Buckeye State from igneous rocks shoved southward from Canada during periods of Ice Age glaciation. At the Virginia site, the GPAA prospectors were looking for deposits of stream-borne, or "placer" gold washed into the creek from native gold deposits.

"There's gold here - you've just got to look for it," said Hillsville/ Southwest Virginia Chapter President Bill Humble, as he watched 20 or so recreational prospectors operate pans, sluice boxes and power sluices in their search for gold.

Sluice boxes are rectangular, open-topped devices, usually three to four feet long that use stream current to wash gravel through a series of gold-trapping riffles and plastic ribs. Power sluices, or high-bankers, use a small motor to pump a larger volume of water through a sluice, increasing the amount of material that can be processed and the amount of gold that can be trapped.

On larger streams, like the rivers that flow through the Ohio GPAA "claims,' some prospectors use suction dredges, or power sluices mounted on floats that use vacuum-like hoses operated by prospectors to bring river gravel to the sluice intake. Larger and lighter rocks return immediately to the river, while heavier iron sands, stray fishing sinkers and shotgun pellets and occasional pieces of gold remain trapped in the sluice's riffles and ribs until they can be panned out.

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Gold Funds Dulled by August Drop 1993, Bloomberg Business News

After five months of brilliance, gold mutual funds are losing their luster. Values are declining. Redemptions are rising.

This is major news in the investment business, which has always been perplexed by gold. The most precious of metals dropped to $366.30 an ounce Thursday on the Commodity Exchange in New York, a noteworthy decline considering that gold stood at its 52-week high of $411.30 as recently as July 30.

What had driven up gold's price were the fears - or hopes, on the part of gold mavens - that inflation was on the march once again. But that five-month buildup appears to have fizzled.

Now, though gold's price makes it tantalizing once again, gold bugs must decide whether they should prospect for gold mines or sidestep land mines. The provocative issue has fund managers split in a lively "point-counterpoint" debate.

"The demand for gold dropped in August, primarily in the Middle East and the Far East," said Ted Arnold, an industry analyst with Merrill Lynch & Co. "I wouldn't recommend buying shares of gold mutual funds right now."

On the contrary, said Malcolm MacNaught of Fidelity Investments. He manages $759 million in a gold fund and a precious-metals fund. "Twelve months from now, gold will be over $400 an ounce because of increasing demand from the jewelry trade and a drop in supply in South Africa," MacNaught said.

Gold's rise to its $411.30 high on July 30 - a 24 percent increase over March's low of $332.50 - was especially significant because gold hadn't broken through the $400 threshold in three years.

The surge was a bonanza to gold funds, which wooed plenty of small investors. The Investment Company Institute, the fund industry's largest trade group, said $1.5 billion had flowed into precious metals funds, which are dominated by gold. That's more than three times the $488 million that had been amassed in the comparable seven-month 1992 period.

But gold started to weaken, shedding a few dollars.

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