Nobody understands gold prices, including me

Good luck trying to predict where gold prices are going, because even the head of the world’s most powerful bank admits he hasn’t a clue.

When asked about the drop in gold prices by U.S. senators during his testimony on monetary policy Thursday, U.S. Fed Reserve Ben Bernanke said decline could mean that investors are less worried about the economy. But he hastened to add: “Nobody understands gold prices and I don’t really pretend to understand them either.”

“Gold is an unusual asset. It’s an asset that people hold as a sort of disaster insurance,” Bernanke said in response to a question at a Senate Banking Committee hearing.

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“One reason gold prices are lower is people are less concerned about extreme outcomes, particularly negative outcomes, and therefore they feel less need for whatever protection gold affords,” he said . “A lot of people hold gold as an inflation hedge but the movements of gold don’t predict inflation very well actually.”

Ironically, Bernanke may need to look no further than himself for guidance on gold.

Bullion has tumbled more than 20% this year, losing its safe-haven appeal after the U.S. central bank first signalled it would look to rein in its $85 billion in monthly asset purchases later this year and halt stimulus altogether by mid-2014.

The Fed’s three quantitative easing schemes have boosted prices of gold and other commodities, as they kept interest rates low, which weighed on the dollar, making assets priced in U.S. dollars cheaper for foreign investors.

As if to prove Bernanke’s point, spot gold briefly shot up 1% to a session high of US$1,288.06 an ounce Thursday. That’s following a 1% drop the day before.

Source: http://business.financialpost.com/2013/07/18/ben-bernanke-nobody-understands-gold-prices-including-me/

Eldorado Gold slashes capital spending by 35%, shelves projects as gold price falls

Eldorado Gold Corp says it will bump back the start dates for three of its European development projects — Skouries and Perama in Greece and Certej in Romania — by at least a year, into 2016 or 2017.<br />

TORONTOEldorado Gold Corp said on Tuesday that it will cut capital spending in 2013 by more than 35%, deferring a full expansion at its Kisladag project in Turkey, in light of the recent drop in the gold price.

The Vancouver-based company also said it will bump back the start dates for three of its European development projects — Skouries and Perama in Greece and Certej in Romania — by at least a year, into 2016 or 2017.

Eldorado now plans to spend US$430 million on capital projects in 2013, down from a previous estimate of US$670 million. The company also revised down its exploration spending to US$51 million from US$98.5 million.

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Source: http://business.financialpost.com/2013/07/16/eldorado-gold-slashes-capital-spending-by-35-shelves-projects-as-gold-price-falls/

Barrick Gold’s US$8.5 Pascua-Lama mine formally suspended by Chilean court until pollution standards met

SANTIAGO — A Chilean appeals court on Monday formally suspended Barrick Gold Corp’s controversial US$8.5 billion Pascua-Lama gold mine until the company builds infrastructure that will prevent water pollution.

In April, the Copiapo Court of Appeals temporarily and preventively froze construction of the project, which straddles the Chile-Argentine border high in the Andes, while it examined claims by indigenous communities that it has damaged pristine glaciers and harmed water supplies.

On Monday, the court said it was ordering a freeze on construction of the project until all measures required in the government’s environmental license for adequate water management, “as well as urgent and transitory measures required by the environmental regulator,” are adopted.

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Chile’s environmental regulator has also suspended Pascua-Lama, citing major environmental violations, and asked Barrick, the world’s top gold miner, to build water management canals and drainage systems. Barrick has said it is fully committed to complying with all aspects of the regulator’s order.

The court ruling also called for the project’s environmental license to be reviewed and for all data on nearby glaciers to be presented to the regulator.

Barrick or the indigenous Diaguita community now have days to appeal the ruling to the Supreme Court.

A source close to the company said Barrick is not likely to appeal the decision.

The Diaguitas could contest the ruling if they deem the measures imposed by the court are too weak, and could potentially ask the top court to seek Barrick’s permit be revoked, lawyer Lorenzo Soto told Reuters.

“If we appeal it would be because the safeguard as ordered aren’t sufficient,” Soto said.

A potential decision from the Supreme Court would likely be issued this year, but it is tricky to anticipate how it might rule on Pascua-Lama, originally forecast to produce 800,000 ounces to 850,000 ounces of gold per year in its first five years of full production.

Last year, the Supreme Court suspended a key permit for Canadian miner Goldcorp Inc’s El Morro copper-gold project, and rejected the planned US$5 billion Central Castilla thermo-electric power plant.

But it also cleared the way for the unpopular HidroAysen hydro-power project.

A full court-ordered halt of the project would be a major hit for Barrick as 80% of the metal reserves are on the Chilean side. It would also be a further blow to Chile’s business-friendly reputation.

Several big mining and power projects have faced setbacks in recent months in Chile, the world’s No. 1 copper producer, where around 60% of export revenue comes from the metal.

It remains unclear what kind of legal action Barrick could take if the permit for its project – whose construction was already well underway – were canceled or placed under review.

To be sure, the regulator told Reuters the project shouldn’t face a permanent block if Barrick meets all the requirements. The regulator added the earliest Pascua-Lama could be reactivated is one to two years.

But Chilean courts have appeared increasingly open to lawsuits from environmental or social groups against mega projects.

While Chile’s economy is riding a copper boom, many in the economically stratified country feel mining profits have bypassed them and hurt the environment, and are increasingly taking their demands to court.

Source: http://business.financialpost.com/2013/07/15/barricks-pascua-lama-mine-to-have-work-suspended-by-chilean-court-report/