Gold Breaches US$1,100 Per Oz

The first week of November was another fascinating one for gold watchers as the yellow metal’s spot price once again shattered new nominal all-time highs and poked its head up above another nice, round number: US$1,100 per oz.

• After touching a new high above US$1,110 per oz. briefly on Nov. 9, gold is trading at US$1,104.60 per oz. at presstime. That’s an astonishing US$370 per oz., or a full 50%, above its levels of a year ago, during the worst days of the global financial panic.

This latest gold-price surge seems to have been triggered by the release in the U. S. of worse-than-anticipated unemployment figures of 10.2% nationwide, reaching double digits for the first time in 26 years. The U. S. dollar dropped as a result and gold — the anti-dollar — simultaneously broke price records. As the U. S. government adopts more and more Western European socialist policies, it’s no surprise that the country may also be taking on Western Europe’s chronic, double-digit unemployment numbers.

In these past few months, it’s been heartening for gold bugs to see the gold price move significantly higher on three of its primary driving forces: supply constraints in the form of reduced central bank selling and producer hedging; demand increases in the form of new central bank gold buying by India and Sri Lanka; and a depreciating greenback that reflects America’s leftward political drift, exploding deficits and rising unemployment.

It was only two short months ago that gold’s ability to stay above US$1,000 per oz. for a full day was thrilling gold miners and investors alike, as prices surged around Labour Day, owing to growing doubts that the debt-besotted U. S. government had any will to protect the value of the greenback.

The gold price has had an extraordinarily strong run up the last few months and many are looking for it to consolidate its gains at a new base somewhere between US$950 and US$1,050 per oz.

One significant gold-price driver that has yet to make its appearance over the last few months is political instability. And it could always return with a vengeance in the new year if renewed conflict breaks out between Israel and Iran, Venezuela and Colombia, the two Koreas or any of the other usual foes.

It was political upheaval that ultimately drove gold to its inflation-adjusted, all-time price high of US$850 per oz. in 1980 — a figure that would be well north of US$2,000 per oz. in today’s dollars. As we’ve said many times, by any savvy reading of economic and political history, this bull market for gold still has a long way to go.

• But forget about gold; for this year’s big gain look to copper. Spot prices have steadily marched from around US$1.50 per lb. in February to just under US$3 per lb. today. But the upward trend finally stalled in early November amid a flurry of contradictory price signals.

These days, copper prices appear to be more affected by currency fluctuations and speculative forces than by underlying fundamentals. It’s a trend being exacerbated by lingering doubts among traders as to the reliability of glowing U. S. industrial data, which show gross domestic product growing 3.5% in the third quarter, factory orders on the rise, the Institute for Supply Management’s manufacturing index performing well, industrial production up, and durable goods orders on the increase.

• Gold Reserve’s days in Venezuela are ending with a whimper, as the company reports that the Venezuelan government intends to cancel the company’s underlying hardrock concession at its Brisas gold-copper property in the KM 88 gold district.

In late October, the government seized the Brisas alluvial gold concession, which is coextensive with the hardrock concession. Government personnel also physically took control of the Brisas camp.

Gold Reserve president Doug Belanger says that the government’s actions are a “continuation of its wrongful treatment of Gold Reserve and its investments and further evidence of the government’s earlier decision to expropriate the entire Brisas project.”

Gold Reserve spent some US$300 million developing Brisas beside the higher-profile Las Cristinas gold project, which the government had earlier ripped from Crystallex International. We’ll see in the year ahead how much of a role, if any, Rusoro Mining will play in developing Brisas and Cristinas, which could be combined into a state-owned mega-mining complex, with funds used to advance Hugo Chavez’s so-called Bolivarian revolution.

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