Price of gold continues to rise and shine

16TH OCT Price of gold continues to rise and shine

By Ellen Kelleher
Published: October 15 2010 18:07 | Last updated: October 15 2010 18:07

The gold price hit another high this week as concerns mounted about the economic outlook, leaving investors facing the question whether to buy gold bullion or shares from the mining companies themselves.
Mining companies across Australia, South Africa and Latin America are drawing attention from buy-and-hold investors who subscribe to the theory that metal prices will be driven higher for decades to come, thanks to soaring demand from the emerging middle-classes in China, India and Brazil. Scores of speculators, meanwhile, are buying into gold-backed exchange-traded funds, hoping to see further upside in the gold spot price, which set another high of $1.387 a troy ounce this week.

Opinions vary on whether mining or bullion is the superior bet. “At times, mining stocks and the gold price behave in very different ways,” points out Justin Urquhart Stewart, director with Seven Investment Management, who has turned bearish on the gold price. While rising spot gold prices push up mining companies’ revenues, their profit margins can be impacted by new taxes and regulations, higher costs and production problems. Just this week African Barrick Gold, the FTSE 100 miner, drew attention to the difficulties miners face when it cut its gold production forecast again after uncovering “organised and systematic” fuel theft at a Tanzanian mine.

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Indeed, the rally in gold is helping other precious metals, with silver hitting a 30-year high of $24.90 per troy ounce this week. Base metals have also performed well, with forecasts for the copper price looking increasingly rosy thanks to shrinkage in supply.

http://www.ft.com/cms/s/2/e5a7cfb6-d87d-11df-8e05-00144feabdc0.html