Gold price punches through US$2,700/oz and A$4,000/oz

The spot price of gold punched through US$2,700/oz on Friday to yet another record high. As we have been saying for many months, gold is the place to be. A number of investors that didn't get set early are telling me that they are waiting for a pullback in the bullion price before wading into the market to buy gold shares, but I think they may be waiting with disappointment.

Buying the "right" gold stock involves more analysis than for many other commodities because the variability of gold deposit geology, grades and economics. There is the added complication of forward selling that might seem prudent at the time, but which can blow up a company if the CFO gets it wrong. The rising gold price is changing the perspectives of the grades needed to make money, even with the capital and operating cost inflation that we have seen in recent years. What was previously economic may now be very profitable.

Gold explorers will obviously get a fillip out of the recent price rises but turning any discovery or early stage resource into an operating mine takes years. The biggest winners are those who can tap into positive cash flow right now and grow from that cash flow rather than calling on shareholders yet again.

I have been following a tiny uranium explorer - Terra Uranium - that has some very interesting ground in the Athabasca Basin of Canada. This is the home of the most impressive unconformity style uranium deposits in the world, such as MacArthur River and Cigar Lake. 

 WeeklyComm19Oct2024.pdf