Gold prices expected to level out this year
Industrial metals strong: Scotiabank
Walter Strong
Northern News Services
Published Wednesday, July 2, 2014
SOMBA K'E/YELLOWKNIFE
With two gold properties under active drilling exploration within a couple-hundred kilometres of the city, a recently oversubscribed weekend mineral prospecting course and Yellowknife's rich history as a gold town, it's not unusual for bar stool talk to turn to the price of gold.
Scotiabank's June 30 commodity price index report might fuel more of that interest, with relatively positive news for anyone interested in the price of gold, and positive news for zinc.
From a high of USD $1,417/oz on Aug. 28, to a low $1,188/oz on Dec. 19, and back up to around $1,113/oz recently, gold has been on something of a roller coaster ride over the past year.
Scotiabank vice-president and commodity expert Patricia Mohr sees the end of the ride, and is calling for gold to stabilize this year.
"My forecast is for consolidation in gold prices this year," Mohr said. "It will level out."
Mohr sees $1,300 gold for this year, and is anticipating $1,350 gold before 2015 is out.
"Gold is a bit of ephemeral product," said Mohr. "It's all about expectations, mostly about what the outlook is for inflation and the strength or weakness of the U.S. dollar."
Mohr sees a strengthening U.S. dollar impacting the price of gold negatively, although global political instability should shore up support for gold prices.
Junior mineral explorers - largely defined as companies without a producing mine - will continue to face difficulties in the near future.
"Financing remains challenging," said Mohr. "Particularly where you have junior mining companies involved."
Juniors have been faced a struggle finding investors
for a number of years - essentially since the economic downturn of 2008 - partially contributing to Mohr's bullish position on one base metal in particular, zinc.
Tight financing for junior mining companies has held up zinc exploration and development, said Mohr. That, combined with a world-wide decline in zinc production as zinc mines approach the end of their producing lives, means a global shortage is on the horizon.
"There are broad expectations in the metal industry that zinc prices are going to move up in the middle of the decade and perform quite well," said Mohr.
Zinc (LME zinc) broke $1 per pound on June 30 for the first time since 2011. Mohr is forecasting zinc to reach $1.25 in 2015.
"The reason for that is significant mine depletion at major mines, like Century in Australia, which will close some time in 2015."
Other mines that have already closed include Eastern Canada's Brunswick and Perseverance mines.
Zinc is corrosion resistant and is used in many automotive and industrial applications. A growing automotive sector combined with a rebound in construction in G7 countries are both strong indicators for zinc demand, said Mohr.
"There is ongoing strength in global automotive sales," said Mohr.
"Last year was a record year (for auto sales), and this year is expected to be even bigger, with solid demand growth in the United States and in emerging markets."
"The supply-demand balance (for zinc) is going to tighten around the world for both refined zinc and zinc concentrate."
The NWT has two zinc projects.
Canadian Zinc Corp.'s (TSX:CZN) Prairie Creek zinc-lead-silver project is an advanced stage project, with much mining infrastructure already in place.
Tamerlane Ventures Inc.'s Pine Point zinc project is in receivership, but sits on a strong zinc resource.
