Gold Shares: “A Higher Gold Price Is Not Enough”

The rising gold price also helped many gold stocks to rise this year. However, the great gold rush sentiment has so far failed to materialise. The discovery of new deposits is lacking.

Gold price also stimulates gold stocks

The gold industry has gone through some difficult years. The sharp decline in the price of gold after 2011 reduced the revenues of the gold mines. Investors turned away. The financing of gold projects became increasingly difficult. This year, mining companies and gold stock investors were hopeful. The price of gold rose significantly and investor interest increased again. The NYSE Arca Gold BUGS stock index with the largest gold producers (HUI for short) climbed by more than 50 percent over the past 12 months. And there have been large corporate mergers. Barrick Gold has acquired Randgold Resources. Newmont Mining grabbed Goldcorp Inc.

Junior sector

However, there is no new gold-rush sentiment, as in the period from 2006 to 2011, for example, where with rising gold prices, the prices of many small joint-stock companies in the gold sector also went through the roof. However, many speculative investors were also severely disappointed during this period. More was promised than encouraged. But the “junior” sector in particular (small mines, advanced exploration with proven deposits) has so far not been able to excel this year with price premiums. At the recent Precious Metals Summit held in Beaver Creek, Colorado (USA), Ioannis Tsitos, President of the Canadian explorer Goldsource Mines, said Kitco News that the industry needs more than a rising gold price.

New discoveries have to be made

He says: “In the last ten years we have seen a significant decline in greenfield exploration budgets [new greenfield gold exploration], which has led to less discoveries and less good stories for the market. As a general rule, gold deposits are nearing their end, and new substantial deposits are hardly being discovered. This is particularly evident in South Africa. But in the USA, too, less and less gold has been extracted from the earth in recent years. Nevertheless, gold stocks still offer good opportunities. However, the selection of suitable values is a greater challenge and involves higher risks than the purchase of gold coins or gold bars, for example.