August 7th 2007 - Where is gold going?

With gold now comfortably maintaining a level of around $670 per ounce, something it seems to have been doing for most of this year, the question has to be asked, where is the best place to put your strategic capital and where is the price going?

Oh for a crystal ball. For every pundit who tells us the price of gold will reach $1000 per ounce in the very near future, there will be another laughing in his face telling us gold has had its day.

Many voices in the private equity industry who have been involved in mining and commodities over the last few years (one of them being Strategic Capital Partners Portfolio Management AG), is still calling for $800 by early November and a years finish of over $850, but they caution their speculation with advice to concentrate on Junior producers rather than merely small exploration companies or the physical asset itself.

Lack of major new discoveries by major gold producers is expected to be one of the major driving forces behind any new upward movement in gold.

Many of the world’s biggest gold producers are casting their nets far and wide for new resources, while the medium sized producers, many still battling with profitability, have largely cut back their exploration. Many seem to believe that finding a junior gold producer in an investment position is the answer. The junior having done the lion’s share of the hard work to prove up resources and often leaving a large area of only ‘probable reserves’ as a tempting possible bonus for any major that might buy them. Discovering one of these hard working juniors can be almost as hard as finding new sources of gold itself and now seems to be the goal of many investors at the moment before the junior is snapped up providing possibly huge profits for the canny investor.

At the time of writing, Harmony mines, one of the worlds larger gold companies, continues to suffer. Warnings of lower production and the resignation of Chief Executive Bernard Swanepoel do not bode well for the group. In comparison, GoldCorp continues to offer a healthy monthly dividend to investors, this month $0.015 per share. GoldCorp is one of the world's lowest-cost and fastest growing multi-million ounce gold producers with operations throughout the Americas from Eleonore Canada, down to San Martin, Honduras and as far south as La Coipa, Chile. Of all the quoted big producers, it is certainly getting something very right and is one to be following.

The fortunes of many of us interested in gold continue to rely upon the renewed gain in the yellow metal, but the secret is certainly knowledge of which horse to back in a complicated race.

To be continued.....