Markets: Gold continues its gains

Spot gold has risen since June, amid continued investor nervousness, as gold miners write off stockpiles.

Spot gold has gained 11 per cent since June 27 when it was at $US1200.65. At 0758 AEST bullion was up US cents 65 to $US1333.95, according to Bloomberg data, up from $US1333.30 Friday. The share prices of gold miners have shown even greater gains.

The stock of Newcrest, Australia’s biggest gold miner, has risen 33 per cent since June 25, when it was at levels not seen since 2003, at $9.06 according to Bloomberg. Medusa Mining has gained 53 per cent since a June 25 share price of $1.265. Resolute Mining is up 47 per cent since July 9, when its share price was 52.5 cents. Perseus Mining has added 34 per cent since June 28.

It’s not hard to see why gold has not lost its allure. Earlier this month the International Monetary Fund said it expects the world economy to grow more slowly that it previously forecast. The IMF now thinks global growth will be 3.1 per cent this year. Moreover, the IMF notes, financial market volatility has increased, especially in May and June. That may be good news for traders but not for those who wish to pin their flags with some degree of certainty to an asset they think may be able to weather such financial storms.

Enter gold. Damien Boey, Credit Suisse’s Australian strategist, says bullion continues to keep its shine because investor sentiment remains extremely nervous. There is no evidence, based on their own subjective experience, to believe government pronouncements the economy is getting better, says Boey. Every week there seems to be news of job losses, including at gold miners.

Last week Newmont, the world’s second-biggest gold miner, said it will get rid of about 80 jobs from a workforce of 1,870 at its Boddington mine in Western Australia. The Colorado company reported a second-quarter loss after taking a $US1.77 billion writedown on the value of its two Australian mines and stockpiles. Gold miners have announced at least $US15 billion in writedowns in the past two months, according to Bloomberg. Newmont wants to reduce its workforce by a third. Investor sentiment and gold company sentiment on bullion could not be further apart.