Gold's safe haven status is starting to slide as metals take a beating.
Robin Bromby From: The Australian April 19, 2010 PURE SPECULATION
TRADERS who went into the weekend holding positions in metals stocks will have had a nervous two days. Gold was down $US23 an ounce on Friday, or 2.01 per cent, to $US1137.
Silver was badly damaged -- down 4.1 per cent, closing at $US17.67/oz.
There was also carnage in the base metals: zinc took the big hit with a 3.3 per cent decline, lead was down 3.2 per cent and copper fell 2.3 per cent.
Nickel and aluminium dropped, too; only tin was resilient.
This all followed the news of Goldman Sachs being charged with fraud and earnings at Google failing to meet the consensus.
As David Thurtell at Citigroup noted: "We're not sure how the Goldman or Google news changes the outlook for base metals consumption, but suspect the longs were looking for an excuse to take some money off the table after the recent stellar run." He says US housing starts were up for the third month in a row and he expects a strong April.
Other commentators were left wondering why gold had fallen so sharply. After all, when financial crises loom, gold is meant to be the safe haven. And the US dollar moved only very slightly upwards on Friday.
Perhaps in the back of traders' minds was the latest gold report from London-based analyst GFMS. Until now, the GFMS crowd has been fairly bullish on gold, so it was a little chilling to read that they believe the gold rally is reaching its endgame.
What has got them worried is the fall in jewellery demand; last year investment demand surpassed jewellery fabrication as the main user of gold for the first time since 1980 (the metal's last big bull run).
Scrap reached record volumes last year -- and, to judge by all the advertisements for people to sell their old jewellery, that source may continue to weigh on the market. GFMS thinks the questions over several major currencies will continue to drive investment in gold, but the consultancy sees a receding likelihood of another financial crisis that would drive gold higher. Only a "hefty drop in prices" would revive jewellery demand and deter people from selling their old rings and necklaces for scrap.
Stronger for longer.
SO, given that speculative stocks might take a battering over the next few days, this is probably a good time to be looking at longer-term stories.
One company that has seen a new lease of life since appointing Gary Ferris to the MD's job last year is Monax Mining (MOX). This junior plans to drill three projects this year. It topped up its bank account late last year with a rights issue and on Thursday said it had increased its planned placement from $550,000 to $590,000 due to demand. Ferris is anxious to shore up the cash position in case there's a turn in the market.
Earlier this month, Monax increased its bauxite target area on Queensland's Cape York Peninsula. It wants to work there before the next wet season.
In South Australia, its 50 per cent partner Marmota Energy (MEU) is drilling the Melton copper-gold prospect, about halfway between Adelaide and Port Augusta. There's a great deal of interest in this, largely due to the good hits being reported from the neighbouring Hillside project by Rex Minerals (RXM). Another player in this area is Southern Uranium (SNU), which is looking for copper, gold and uranium at the Ridgeback project. At the end of April, Monax will start drilling its Waddikee manganese project on the Eyre Peninsula, where it is in joint venture with manganese producer OM Holdings (OMH). Sampling has produced average manganese grades of 41 per cent. Then there is Punt Hill, south of Olympic Dam, which Monax considers its flagship project.
MOX Price at posting:
11.5¢ Sentiment: None Disclosure: Not Held
