Weekly $CDN Gold Price

When the gold price corrects, you want to take a quick look at the $CDN gold price and where the value is. It comes as a pleasant surprise that while the $U.S. price has declined rapidly to find its low, the $CDN gold price is well above the same price.

Miners, contractors, and Sask Power are all paid in $CDN.

The $CDN gold price actually fell to just above the 34-week EMA and settled at the 13-week EMA, while the $U.S. gold price fell to below the 34-week EMA. Throughout this correction, gold maintained its purchasing power.

One salient detail that most will miss are the supports under the $U.S. gold price, exactly where lease rates are situated vis a vis the discount rate. The Gold Forwards Rate minus LIBOR is the gold lease rate, which is negative in the short term. However, should the discount rate go negative, then gold price will necessarily advance. On those mornings where the discount rate goes negative, the gold price has made strong advances.

Another aspect to keep in mind is that lease rates have not risen significantly on the correction, so if bullion demand for delivery intesifies, then lease rates may actually rise in a rising $U.S. gold price, just when rates are dangerously sinking into negative nominal rates.

A decline in the $U.S. prices to test the 34-week EMA probably sets in the delay for advances in that currency. But since the decline in the $CDN gold price has kept it around the 13-week EMA, that may mean that advances in $CDN gold prices might not experience a significant delay, which is beneficial because the bills are paid in loonies.

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GBN Daily Linear Scale

The longer term daily linear scale chart is showing the extremes that the share price has sunk to, much to the chagrin of shareholders. No point trying to underline that sell-side brokers have the complete upper hand.

Throw out all of the negative implications of price arbitrage and you get a share price that is testing a 1p/e price level in advance of earnings.

Taking a moving average over 5 or ten years gives you an average share price which some investors will have trouble matching, so I assume most are sitting on a loss.

News of the note paydown was very positive, though it did come on the heels of a major financing. This week is the first publication date for the Canada Gazette Part II and the overdue tailings impoundment approval. It should be immediately followed by the first quarter report according to IFRS rules.

A delay in the 1Q report was not necessarily a bad thing, since the filing due date fell on a major correction. Better that it was inadvertently held off. Rumour has it that a major credit collapse can happen in the next three weeks, so further pressure on equities is shouldn't be ruled out.

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Articles Of Interest

The sprint for the IFRS finish line:

http://www.mining.com/2011/02/07/the-sprint-to-the-ifrs-finish-line/

(great website)

The coming precious metals dividend war

http://www.mining.com/2011/10/06/the-coming-precious-metals-dividend-war/

(the gold notes by Sprott were equally gimmicky, hopefully the company won't ever enter into this type of deal ever again and stockpile dore bars instead.)

The Rich Run For Cover

http://business.financialpost.com/2011/10/05/rich-run-for-cover-as-turmoil-hits-wealth/

(ahem - gold producers with robust grades starting at the outcrop)

-F6