Gold News

Spot gold gains 0.5% ahead of US consumer confidence data

Spot gold prices held steady in Asia and Europe today, standing 0.5% higher as the New York open drew near from Monday's opening level.

Gold also crept back towards €500 for German, French and Italian investors, and it leapt against Sterling as the British currency sank on dovish comments from the country's chief central banker.

On Wall Street, stock futures pointed downwards on expectations that today's US consumer confidence data for March – due at 10:00 Eastern Time – will fall from 112.5 last time around to 109.

Home builder Lennar has added to Monday's worries about new home sales in the US too, reporting weak earnings and backing away from its previous full-year '07 guidance.

(What might the ongoing problems in US real estate mean for gold prices? Click here to read more...)

Earlier in Tokyo, gold futures for delivery in Feb. '08 rose 0.9% to the equivalent of $670 per ounce. The Nikkei stock index, meantime, fell 0.9%.

In the broader commodities complex, copper rose to a fresh 3-month high in Shanghai on news of falling stockpiles, and crude oil held near its 3-month highs above $64 per barrel in London.

Energy prices look to be supported by the ongoing row about Iran's nuclear program and its seizure of 15 members of the Royal Navy in the northern Gulf.

"Though the threats [to gold] from overbought levels still persist," reckons Pradeep Unni, an analyst at Vision Commodities Services in Dubai, "it is not ideal to short [gold] at these levels – especially when the Iran jitters are back in markets and crude's giving an enthusiastic response to the same.

"A rally in crude oil prices would necessarily have its first reflection on inflation, which would make the US Federal Reserve wary – boosting gold."

The real boost to gold, however, always comes from falling or static US interest rates – as this research shows...

Looking to longer-term gold mining supply, Reuters reports that South African firms "are rushing to reprocess mountains of waste while gold prices remain buoyant."

"The stuff that's on surface, it's low-hanging fruit in a strong Rand gold price environment," one analyst told the newswire.

"Right now these guys are just making hay while the sun shines."

A reprocessing plant for waste tailings can take just two years to set up. A new mine, on the other hand, can take up to 15 years.

The trend has swept up both junior producers and the big players, like the world's fourth and fifth biggest gold producers Gold Fields and Harmony respectively.

Harmony, the world's fifth largest gold miner, is now assessing a $166.2 million project that could reprocess between 1.5 and 3 million tonnes of waste per month.

That could produce up to 12.5 tonnes of gold per year, starting as early as 2010.

The move comes as Rand costs for South African miners have soared in recent years.

Output from the world's largest producer country has halved in 10 years. Reuters says that these new tailing works will target 0.2 to 0.4 grams of gold per tonne, compared to grades for gold-in-the-ground of up to 10 grams per tonne.

And while recycling looks like an easy money-spinner at first glance, "it's important to remember there is a substantial up-front investment required," says Steve Shepherd, a mining analyst at JP Morgan.

"It presents considerable risk despite what may be attractive operating economics."

For more on the global gold supply outlook in 2007, click here now...

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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