Late last week base metals - and copper especially - were in, and gold was out. The financial panic was over, China was buying metals again and no one needed gold as a safe haven.
So, at the time of writing, the ASX is down about 90 but Perseus Mining is up about 12 per cent on heavy volume, after strong rises last week. And Perseus is up because it is a gold stock - and, seemingly, a great gold stock. Somewhere God is laughing. The Ghanaian explorer released its latest resource after the market closed last night, and it was every bit as good as expected. The overall figure was still just over 5 million ounces, but the resource contained within the planned pit had shot from 1.9 million ounces to 4 million.
At the close of New York trading this morning (our time), gold had risen $US19.60/oz to $US887.50/oz.
And, overnight, a report from London-based Edison Investment Research gold expert Charles Gibson was opening the door to another leg upwards for the yellow metal. He has joined the chorus warning that gold derivatives may not prove reliable if the global financial crisis gets worse. These all involve counter-parties - and counter-parties can default.
Gibson is concerned because of the growing shortage of physical gold - the bullion banks are facing a 500 tonne shortfall - so he’s telling investors to hold the physical, whether it be bars or Kruggerands.
Two final points.
Last week there was talk of copper being a better hedge than gold because China was buying the red metal. Now, two other possible explanations have surfaced. One is that China is buying, not so much to convert its dollar-denominated reserves into a hard asset, but because it is seeing an acute shortage of copper scrap. Two, one new argument is that this copper rally will be short-lived because 46 per cent of the metal is used in construction, another 12 per cent in vehicles - both deeply troubled sectors worldwide.
And a footnote to yesterday’s report on uranium. Overnight, the spot price made its first gain in weeks, up $US1 to $US41.50/lb, on news of end-user buying.
