Gold mining is now the brightest, most profitable and fastest growin g segment of the North American mining industry. And the price of the metal, which has been unusually strong in recent weeks, still looks very positive.
Indeed there are so many strong factors on the positive side that we look for a continuance of this metal’s uptrend. Certainly these far outweigh the likelihood of any significant decline, especially in view of the strong base that was established prior to this latest advance.
Gold, of course, traditionally shines brightest during times of economic troubles and uncertainties. And these exist aplenty today, not the least of which are the huge U.S. trade deficits which show no signs of reduction despite the sagging value of its dollar. In addition, there are ominous indications that that country’s over-all economy is in a downtrend. Coupled with this is concern about the health of its banking system which is under severe pressure brought on by bad loans exacerbated by the sharp drop in the price of oil.
The strong and growing demand for gold coins is unquestionably a new factor in the metal’s price rise, especially from Japan which recently purchased some 200 tonnes to mint 10 million 20-gram commemorative Hirohito coins with a face value of one trillion yen. There are significant implications to this move, for gold is still cheap in yen terms so that the demand is proving extremely strong with the likelihood that another five million of these coins will be minted. Furthermore, with a face value (100,000 yen) well above its gold content, these are looked upon as a currency rather than a bullion coin. It is thus seen as the first move in years by any major currency towards gold as a monetary vehicle that could well lead to a massive new area for bullion demand.
The United States, too, is getting into the international gold coin market with the well-timed minting of its American Eagle, the first bullion coin that country has turned out in over 50 years. These will be available to the public by early November. Again, they are expected to be in strong demand.
Not surprisingly, gold’s recent rise has stimulated renewed interest in the shares of gold mining companies. So far this has been largely directed to the senior producers rather than the junior and more speculative issues. But this will come. Indeed it is already showing up in the trading activity on the Vancouver Stock Exchange which chalked up a volume of 276 million shares valued at $343 million, its busiest August ever.
As detailed in our news columns week after week, gold exploration in this country is now at a feverish peak, with production rising with a real push from the three big new mines at Hemlo. This boom, in turn, calls for the raising of substantial amounts of risk capital which, fortunately, is becoming easier to raise in this country. Also, there are heavy demands for capital funding — for to bring even a medium sized gold mine into production today runs in the neighborhood of $50 million.
With our oil industry in a slump, it’s a godsend that we are coming into a real gold mining boom. This is certainly no time to be selling gold or gold mining short.