(InsideMetals.com) Reno - At their annual meeting in Toronto, during a question and answer session on May 20, 2008, Kevin McArthur, President and CEO of Goldcorp stated that he was certain that investors would soon see 4-digit gold prices again (as gold prices climbed above $1,000 per ounce in March). In the last month there have been several articles written that have predicted a strong rise in the price of gold, even though in the last couple of weeks there has been a decline in the price of gold. Since mid-July gold has declined from $986 per ounce (London Fix) to close the month at $918 per ounce, a decline of $68 per ounce (7 %).

In their recent Gold Commodity Update, Citigroup's metals analysts John H. Hill and Graham Wark predicted that gold is likely to again exceed $1,000 per ounce at the end of 2008, and to climb even higher through 2009-2010. These analysts stated that supply and demand factors favor gold during the second half of 2008.

On July 14, 2008, investment bank, USB reported that it raised its short-term gold price forecast as a result of renewed financial market turmoil over the health of U.S. mortgage companies Fannie Mae and Freddie Mac and the appeal of gold as a safe haven. USB said it sees the average price of gold over $1,000 an ounce over the next month. The bank also forecast that gold would reach $1050 an ounce over the next 3 quarters.

Gold prices have been easing in the second half of July as oil prices have declined and the U.S. dollar has strengthened. On July 30, 2008, there was a broad decline in commodities as a result of a strong U.S. dollar. Most commodities are priced and traded in U.S. dollars. On Tuesday, July 29, 2008, oil tumbled to a 7-week low on demand worries and gains in the dollar. Oil has now fallen more than $25 per barrel from its high of $147.27 reached on July 11, 2008.

At what point might the rise in gold prices resume? Refer to the chart below which reflects the one year relationship between the price of gold (London Fix) and the value of the euro with respect to the U.S. dollar. This chart shows a strong upward movement in the price of gold from approximately $660 an ounce at the beginning of August 2007, to over $1,000 an ounce in late March 2008. During this powerful movement in the price of gold the value of the dollar with respect to the euro declined until late November 2007 when the U.S. dollar held its value (1.43 to 1.48 dollars per euro, represented by the heavy horizontal line) for a period of approximately 10-weeks, until mid-February 2008, while there were concerns of a recession in the U.S.

With a resumption of a weakening U.S. dollar from mid-February 2008 thru mid-April 2008, the price of gold climbed to a record high in March 2008 of $1033 an ounce. For the last several months gold bullion and the U.S. dollar have been trading in a relatively flat consolidating pattern (1.60 to 1.54 dollars per euro, represented by the second heavy horizontal line). Since May 2008, gold has been more volatile than the U.S. dollar and has been gradually trending upward. We expect the price of gold bullion to soon spike upward on weakness in the U.S. dollar and if oil prices return to their recent highs.

The gold stocks that should benefit from an up-turn in the price of gold are New York Stock Exchange gold producers Goldcorp Inc, and Barrick Gold Corp. based on recently reported 2008 second quarter earnings.

During Q2'08 Goldcorp began the quarter trading at a stock price of $38.75 per share, and reached a high of $51.06 per share on July 14, 2008, an increase of 32%. Goldcorp has since declined by 27% to close the quarter at $37.35 per share. Goldcorp is currently trading at approximately $36.50 per share. At the close of the quarter Goldcorp reported adjusted net earnings of $83.2 million on gold sales of 556,200 ounces. A non-cash foreign exchange loss on the evaluation of future income tax liabilities led to a reported net loss of $9.2 million for the quarter. While gold production was approximately 10% lower than expected in the quarter, production guidance for 2008 has been revised to 2.3 to 2.4 million ounces of gold at a total cash cost less than $300 per ounce compared to an initial 2008 production forecast of 2.6 million ounces at total cash cost of $250 per ounce.

The share price of Goldcorp should rise on the strong quarterly results and strong margins based on rising gold prices and a low $300 per ounce total cash cost.

During Q2'08 Barrick began the quarter trading at a stock price of $41.92 per share, and reached a high of $50.39 per share on July 14, 2008, an increase of 32%. Goldcorp has since declined by 16% to close the quarter at $42.35 per share. Barrick is currently trading at approximately $40.58 per share. At the close of the quarter Barrick reported a net income rise increase of 22% to $485 million on gold sales of 1.866 million ounces. Barrick is on track to meet the low range of its 2008 forecast of 7.6 to 8.4 million ounces of gold. Total cash costs for the year have been revised upward to a range of $425 to $445 per ounce.

The share price of Barrick should rise on the strong quarterly results and strong margins based on rising gold prices and a slight increase in their Q2'08, $417 per ounce total cash cost.

Another company that we expect to do well when gold turns upward is Yamana Gold Inc. The company will report its Q2'08 earnings after close of business on August 6, 2008. During Q2'08, Yamana began the quarter trading at a stock price of $14.04 per share, and reached a high of $16.57 per share on June 27, 2008, an increase of 8%. Yamana has since declined <1% to close the quarter at $16.54 per share. Yamana is currently trading at approximately $12.25 per share. At the close of the quarter Yamana produced 260,000 gold equivalent ounces which comprise 205,000 ounces of gold, 2.8 million ounces of silver, and 36.6 million pounds of copper. Yamana expects to produce 610,000 to 685,000 gold equivalent ounces in 2008.