Gold Hangs On By A Whisker

March 17, 2009 | By | Reply More

Midday European trading today (Tuesday) saw gold hanging on to the $920 an ounce by a whisker with silver a fraction ahead of last nights NY close but still 5 cents under $13 an ounce.

We can expect further downward pressure on these prices as oil loses more ground and a little positive sentiment creeps back into stock markets on the back of some banks reporting a good start to the year.

Stillwater Mining Co.(SWC:NYSE), a favourite PGM miner of ours in previous times, has reported a loss of $131.9 million for the fourth quarter of 2008, the result of the steep drop in the price of platinum and palladium.

The annual net loss amounted to $112.7 million compared to $15.5 million for 2007.

We liked this miner for a number of reasons, not least of which is that its mining operations are based in the politically safe environment of the USA.

The trigger that will set up the demand for platinum is the auto industry, any signs of recovery should be a buy opportunity for Stillwater.

In the meantime this kind of news is reflected in the present poor price performance of PGMs and their producers.

Another announcement, reported by Bloomberg, that should be taken note of by our readers is that J P Morgan Chase suggests that Paladin Energy Ltd. (PDN:ASX) an Australian based Uranium producer, may be a take over target for the worlds largest producer, Cameco Corp. (CCJ:NYSE) or one of the other major producers.

With uranium prices down by 30% in the last six months and well off the highs reached earlier last year, producers are trading at or near their bottoms. No doubt there will be a jump in Paladin but if nothing transpires in the short term the price may well fall back to reflect the loss of interest.

That may be the time to get in for the long term as uranium is still looking like the world’s favorite future source of energy.

For now we are likely to see a lot of volatility in gold and silver prices for a few weeks ahead, but are encouraged by some continuing signs of underlying bullish support keeping the price above the $900 level. In the longer term we are still optimistic that the price will drive up and be sustained at over $1000 an ounce and probably considerably more.

However it will require long-term investors to keep their nerve and ride out any storms that may occur in the meantime.

In the wider precious metal producer market, it may be fast approaching the time to take advantage of what looks like bargain basement prices for the majors, particularly if the physical metals take off.

Remember also that the current economic crisis has taken its toll of development and exploratory plans so cash rich majors will be looking for fast access to immediate physical resources by either outright acquisition or investment in smaller producers once they sense that demand is picking up.

Exciting times ahead for the bold that can lay their investments on a sound foundation of good research.

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