Editorial: Gold’s time to shine

Breathe a sigh of relief: Gold’s up over US$1,400 an ounce again … at least for now.

As August draws to a close, this year is shaping up to be another in which gold prices firm into September and October, as business and political life speed up after the slower pace of summer in North America and Europe.

The first half of the year was grim for gold bugs, as spot prices retreated from US$1,664 per oz. at the end of 2012 to close out June 2013 at just US$1,192 per oz., for a 28% decline in six months, and a return to trading levels last seen in August 2010. The 23% collapse in the gold price in the second quarter was gold’s worst quarterly performance since the 1970s.

Moreover, the gold miners became the pariahs of the equity markets in June and July, as operating costs soared, writedowns abounded and profits withered. The NYSE-Arca Gold Bugs Index fell from 444.22 on Dec. 31, 2012, to 228.09 at the end of June for a 49% six-month decline — at the same time the S&P 500 Index rose 12.6%.

What a difference two months makes: As we go to press, since the end of the second quarter, the spot gold price is up 19% and the Gold Bugs Index has rallied 12%, well outperforming the S&P 500’s 1.8% rise.

Gold bulls point to slew of positive economic and political factors that could give gold buoyancy in the months ahead, even as the large contingent of naysayers out there are calling for an imminent correction.

As drivers for gold, the bulls point to a resumption of gold-positive budget gridlock in Washington in the fall, as well as the German election in September that will affect monetary decisions in the eurozone, plus gold’s renewed safe-haven appeal as civil life in Egypt and Syria deteriorates and oil prices top US$100 per barrel.

Since 2008, the gold bears have been smugly asking gold bugs the question: “Where is this scary inflation you predicted?” and the gold bugs have been muttering an answer year after year that “It’s coming — just you wait and see!”

Gold bears this year have been pointing foremost to the U.S. Federal Reserve’s consistent message that it intends to wind down its third round of quantitative easing (QE3), a message that boosted the U.S. dollar and bond yields, and beat up gold prices in the first half.

Since July, the gold price is showing a wavering in confidence that the Fed will go ahead with its QE3 wind-down at the originally anticipated scale and schedule.

There’s lots of time for back and forth until the next big event in gold: the Federal Open Market Committee meeting in mid-September, when chairman Ben Bernanke, likely in his last few months in the role, will probably try to wrap up QE3 before his departure so he can tie up loose ends, and leave the politically difficult decision of inevitable policy interest rate hikes to his successor.

• Colombia has an unmistakable allure to North American exploration geologists, with its incredible mineral potential, mining-friendly culture, great weather, and, at its best, exciting and fun lifestyle.

Colombia’s dark side, of course, is its high crime level and chronic political violence.

Toronto-based, TSX Venture-listed Braeval Mining knows both sides of the country well. On Aug. 27, the company confirmed that its vice-president of exploration Gernot Wober had been safely released by his kidnappers in southern Bolivar province in northern Colombia after 221 days in captivity. The company said he was “in good health in the care of Colombian authorities,” was being helped by the Canadian embassy, and would be reunited soon with his family in Canada.

In mid-January, Wober, two Peruvians and two Colombians — three employees and two consultants — were seized before dawn at Braeval’s Snow Mine gold-silver project by about two dozen rebels of the leftist National Liberation Army, who object to foreigners exploiting Colombian gold resources. The other four had been released earlier.

Braeval — which only went public late last year — has already exited the country, and is now focusing on better days ahead at its Guaynopa gold-skarn project in Mexico’s Sierra Madre Occidental region, and in its hunt for economic gold porphyry systems and associated epithermal mineralization southeast of Lima, Peru.