Markets: Bold gold

Gold miners have got a healthy kick from the rising spot price.

“Gold! Gold for Australia! Gold!” as the famed sporting commentator Norman May said during the 1980 Moscow Olympics.

Spot gold is up 11 per cent from June 27 when it hit $US1200.65 an ounce. Yesterday bullion jumped 3.1 per cent, according to Bloomberg data. At 0854 AEST spot gold was at $US1337.87, up $US2 or 0.2 percent from $US1335.88 yesterday.

US Commodity Futures Trading Commission data shows speculative investors have increased their net-long position in futures and options by 56 per cent by July 16, the highest since June 4.

Gold miners surged yesterday. Alacer Gold was up 10 per cent, Medusa Mining gained 21 per cent, Resolute Mining rose 17 per cent, Evolution Mining increased 13 per cent and Newcrest added 7.5 per cent. Many of these stocks have lost more than half their market value in the last 12 months. A recovery in the gold price will help their bottom line as well as the economics of planned or current projects.

Executives at the gold explorers and miners have maintained that physical demand for the metal is strong, especially in India and China this year. In interviews with Markets Spectator they have declined to forecast what the price of gold may be but some have said they wouldn’t be surprised to see it trading at between $US1200 to $US1300 for the next 12 months.

Looming over the gold price is the prospect of the US Federal Reserve trimming its $US85 billion ($92.6 billion) monthly bond purchases. Some expect that to begin in September. Gold, which some view as the ultimate store of value, may lose some of its shine with many – but not Norman May.

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