Editorial: Gold’s mixed signals

The fickle nature of the gold market was on show in late February, as Wall Street powerhouse Goldman Sachs dramatically revised downward its 2013 gold price forecast on Feb. 25 to US$1,600 per oz. from US$1,810 per oz., citing the recent drop in prices compounded by a rise in U.S. real interest rates.

If Goldman’s prediction comes to pass, that would mark the first year-over-year average gold price decline since the bull market started in 2001, with October 2012 marking the beginning of the current decline.

Goldman got even more bearish for 2014, revising downwards its predicted average price to just US$1,450 per oz., from a previous US$1,750 per oz.

As for the weakness in gold in mid-February, punctuated by a seven-month low of US$1,554.49 per oz., Goldman said that most of this price decline has “coincided with a gradual increase in U.S. real rates, reflecting the combination of better-than-expected U.S. economic data, a more hawkish interpretation of recent Fed communication and a lower level of U.S. fiscal and European sovereign risks.”

It added that “the turn in the gold price cycle is likely already underway,” and that “we believe that a sharp recovery in prices to our previous price forecast is unlikely.”

However, to the delight of gold bugs, Goldman’s gold gloom was followed up less than 24 hours later with the sharpest uptick in the gold price seen this year. Gold futures on Feb. 26 soared US$25 to US$1,611.60 per oz., reportedly on concerns over the European economy in light of Italy’s surprise election results, new testimony by U.S. Federal Reserve Chairman Ben Bernanke extolling the “clear” benefits of quantitative easing and loose monetary policy, and rapid short-covering after gold broke above US$1,600 per oz. once again.

For the indomitable gold bugs, the continued presence in the market of sizeable gold bears is a sign of a healthy market still populated by active buyers and sellers, and a necessary condition for gold’s long-term bull run to continue.

• The theory that a local population in financial distress will be more likely to accept an open-pit mine in their community is just too simplistic.

Such is the case in economically depressed Greece, where on Feb. 17 a group of 50 masked and armed individuals entered Eldorado Gold’s Skouries open-pit and underground gold project in the northeast Halkidiki Peninsula, where they destroyed and set fire to the company’s offices, plus several trucks and heavy equipment, mostly owned by local contractors. Two security guards were beaten, tied up and doused with accelerant, with one requiring brief hospitalization. Video of fires set by arsonists at the work site have been posted online in the Greek language at http://youtu.be/S7HcmWqaHo8.

Eldorado said the attack would only set it back a week or two, and emphasized that it is “in possession of all permits required to operate legally at its projects in Halkidiki,” and that it is operating “to the highest environmental standards complying with all local, national and international laws and regulations.”

• Great news for our readers who are Apple aficionados: we’re rolling out our weekly edition to appear on iPads and iPhones.

To get to it, go the App Store and type “Northern Miner” in the search box. From there you are able to download an app that lets you access the Apple newsstand. We have 10 issues up there at the moment, and will soon have a free demo issue available.

The beauty of the product is that you are able get a full digital, hyperlinked and visually attractive version similar to a PDF, and will be able to purchase issues individually, in value packs or as a yearly subscription. For instance, if you missed Trish Saywell’s fascinating feature story on her visit with John Felderhof in the Philippines, you can now buy that single issue from December to read on your iPad or iPhone today.

As we have phased out physical newsstand sales in parts of Canada, this makes newsstand sales of individual issues available to a global readership.