Goldman Sachs shines spotlight on Gold

Editorial Cartoon by Pat Bagley, Salt Lake Tribune.

In a note to clients today, Goldman Sachs said it expects gold prices to continue to climb in 2011 given the current low level of U.S. real interest rates. “We recommend near-dated consumer hedges in gold,” the investment bank stated. The often maligned U.S. based investment firm expects further increases in commodity returns later this year and into 2012 as demand growth is still likely to be sufficient to tighten key markets. In addition to gold, Goldman also likes copper and zinc.

Goldman highlights European debt, the ongoing battle between balancing inflation with growth in China and mixed data from several major economies as drivers that are expected to result in near-term market volatility. And volatile markets are generally good for gold.

Gold futures tumbled to a six-week low on July 1 as it became apparent that Greece was going to resolve their debt issues and prevent default effectively curbing demand for the metal as a safe haven investment. U.S. Commodities Futures Trading Commission data shows that hedge fund managers and other institutional investors decreased their net-long positions in New York gold futures by 18 percent during the last week of June. At month’s end, gold touched a low of just under $1,480. Since then, gold has quietly rallied and is currently trading at just under $1,530, up almost $50 an ounce.

Canadian investors appear to agree with Goldman Sachs. Gold stocks are among the TSX Exchange’s top traded equities of late. And today, we take a look at three gold miners that are on the most active list.

Argonaut Gold Inc. (TSX: AR)

In a results driven market, the market took notice when Argonaut released their first quarter 2011 results on June 6th, 2011. The company announced record revenue of $25.7 million and record net income of $5.9 million for seven cents per share. Since then, daily share volume has picked up considerably and over 2.5 million shares have exchanged today making it one of the TSX’s most active issuers. Argonaut Gold is a Canadian junior gold producer and exploration company with mining operations in Mexico.

About the results, Pete Dougherty, Argonaut’s President & CEO, said, “The year of 2011 began with a substantial increase in reserves and resources at El Castillo. This quarter marks the second quarter of an annualized production rate of 72,000 ounces, with cash costs at $590 per gold ounce sold. This is in line with company guidance for 2011.” Argonaut’s shares are up $0.75 since the first quarter results were released in early June and are currently trading at $5.75.

Avion Gold Corp. (TSX: AVR)

Shares of Avion Gold have been trending up recently, from the $1.50 range, since the company announced drill results from its Hounde project in the West African country of Burkina Faso. The results announced on June 9th, 2011 included 2.80 grams per tonne Au over 53.7 meters. Shares of Avion Gold made a further move yesterday, Wednesday, July 6th, after the company announced an initial mineral reserve estimate of almost 1 million ounces of gold over seven deposits and several stockpiles of ore which comprise their Tabakoto project in Mali, West Africa. Avion’s closed at $2.40 up $0.30 on the day; currently, over 2.5 million shares have traded hands and are currently priced at $2.23.

Last week, Avion’s counterpart in West Africa, Volta Resources Inc. (TSX:VTR),  which also has operations in Burkina Faso and Mali, posted the third largest weekly gain on the TSX Exchange – CLICK HERE – for the article.

Sandstorm Gold Ltd. (TSX-V: SSL)

On the Venture board, Sandstorm Gold is the second most actively traded stock today with over 1.3 million shares being exchanged by midday. Shares of Sandstorm Gold have also been on the rise since early June after the company announced drill results from six new holes at the Aurizona mine which included 48 meters at 3.29 grams per tonne gold. The news was announced in association with Sandstorm’s partner Luna Gold Corp. (TSX-V:LGC). In accordance with Sandstorm’s gold purchase agreement with Luna, Sandstorm is entitled to purchase 17 per cent of the life-of-mine gold produced from the Aurizona mine at a per ounce price equal to the lesser of US$400 and the then prevailing market price.

Mike Luft

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