Toronto Stock Exchange Easing inflation fears depress gold, boost

If that turns out to be the case, then the central bank’s effort to put a brake on inflation by bumping up the bank rate appears to be working. Another 3.97 pts were added to the composite index which advanced to 3599.91 pts — up 31.3 pts for the week.

But what is good for industrials and other sectors of the market is not always good for gold. The precious metal got its wings clipped as prices dipped to $383.90 on the second London fix. A traditional inflation hedge, gold has little appeal in a slowing economy. Also, the recent level of interest rates makes gold appear dull when compared to income-generating fixed income notes yielding more than 11%.

The bottomline is that the gold and silver index took another walloping, closing 43.29 pts lower at 5577.42 — not far off this year’s low of 5380.45 pts. The metals and minerals index also gave up considerable ground, falling 23.62 pts to 3336.11 pts. Volume was a healthy 27.9 million shares.

Inco Ltd., the star of 1988 and by early accounts, the star of 1989, gave up 50 cents to $35.50 on more than 477,000 shares. The company earned a record $276 million(US) during the first quarter and is on its way to breaking the $1-billion mark this year. The possibility of another special dividend is becoming more likely if the company continues to make money at this rate.

Falconbridge Ltd. was strong and active as 405,000 shares were traded, moving the stock to $30.63. Talk continues that the company has a deal with Noranda Inc. concerning the world-class Kidd Creek deposit near Timmins. New Quebec Raglan Mines, a sleepy Falconbridge-controlled issue, perked up to a new high of $5.75 on news that Falconbridge plans to offer $5.36 per share on all the Raglan shares not already owned. The deal values Raglan at $56 million. We estimate the gross value of its rich nickel deposit in Quebec at $6 billion today. Raglan shareholders had better look at this deal closely.

Silver issues were pounded by easing prices. Equity Silver Mines fell to $4 before recovering to close at $4.05. The low is $3.80. Equity operates an open pit silver-copper mine in B.C. United Keno Hill Mines, which used to operate three silver mines in the Yukon before being forced to close them, continued heading south to a new low of $3.20.

The other silver miner, Agnico- Eagle Mines, is looking at closing its operation near Cobalt, Ont., this summer if prices for the “poor man’s gold” don’t improve by then. (See front page story). The issue traded at a new low of $11 before closing at $11.13.

Major gold issues were either unchanged or lower. American Barrick Resources was steady at $25.50 whereas Placer Dome Inc. closed unchanged at $15.63. LAC Minerals was also firm at $12.

The same couldn’t be said of junior explorers. MVP Capital, a proxy for the junior sector, told the dismal story. It hit a new low of 40 cents before closing at 42 cents . MVP holds a large portfolio of junior shares.

Belmoral Mines and Canamax Resources were both sold off, falling to new lows of $1.16 and $3.50 respectively. Joutel Resources was also a loser, selling to a new low of 18 cents . High River Gold Mines appeared to buck the downtrend, adding 26 cents this week to close at $1.45.

Last week we commented on the palladium mania which was sparked by the cold fusion experiment in Utah. Well the bubble burst, as the metal plunged its daily limit. Madeleine Mines, which has a platinum group metals prospect in Ontario, briefly soared to a new high of $6.75 before promptly crashing by more than $2 to close at $4.35 today.

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