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Financial Times notices that gold is winning, and partly why

Section: Daily Dispatches

Gold Will Keep Its Shine This Year

By Jack Farchy
Financial Times, London
Friday, February 18, 2011

Unbelievable. Explosive. Insatiable. These are some of the words bankers are using to describe the gold market. That may come as a surprise, as the gold price has had an uncharacteristically quiet start to the year, for the most part trading either side of $1,350 an ounce.

The dramatic language is being applied to the strength of Chinese demand. Many have been truly shocked by the level of Chinese buying in the first few weeks of the year. As one senior banker (who is not prone to hyperbole) put it: "The demand in China is vast. It's unbelievable. Whatever you think the demand is, it's much bigger ... I'm really staggered."

With the consensus among analysts growing ever more cautious on the outlook for the gold price this year, gold bears (and bugs) need to pay attention to developments in China. Some of the biggest physical bullion traders, who see the strength of demand from China (and much of the rest of Asia) are finding the bearish views hard to swallow.

... Dispatch continues below ...


Prophecy Resource Spins Off Platinum/Palladium Venture:
World-Class PGM Deposit in Yukon

Company Press Release, January 18, 2011

VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy.

PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding.

Following the transaction:

-- Prophecy will own approximately 90 percent of PCNC.

-- PCNC will consolidate its share capital on a 10 old for one new basis.

-- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp.

-- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings.

Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000.

For the complete announcement, please visit:

The most recent data from the World Gold Council, the miner-backed lobby group, show the extent to which the focus of the market is shifting to the east. Last year China overtook the US and Germany to become the second largest gold investment market after India, the WGC said. Between them, China and India -- which also witnessed a fairly stunning rebound -- accounted for 51 per cent of global gold demand (excluding industrial consumption). That’s up from 42 per cent in 2009 and 31 per cent five years ago.

This year looks likely to extend that trend, if January is anything to go by. But the key question for gold investors is: Can the growth in Asian consumption outweigh any weakness in Western investment demand?

It is a well-worn dictum that investor appetite for gold moves in an inverse relationship with real interest rates. When real rates are low or negative (that is, when inflation is near or higher than interest rates) gold benefits as the opportunity cost of holding it is relatively low, and its properties as a wealth-preserver come to the fore. With investors bringing forward their expectations for when central banks in the US, eurozone, and the UK will raise rates, gold demand in those countries could suffer.

But the link applies just as well in China, India, and other parts of Asia, where rising food inflation is eroding the value of local currencies. For that reason, traders say, it would be wrong to write off the spike in Chinese demand as a seasonal blip related to the lunar new year holiday.

As any iron ore, copper, or oil seed trader can attest: Underestimating China's potential to revolutionise a market is a dangerous bet.

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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.

"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit: