Gold Price Hike Triggers Gold Mining Investment Tide

SHENZHEN, Mar 25, 2008 (SinoCast via COMTEX) -- NO MATCHES FOUND. | news | PowerRating | PR Charts -- Fast appreciation of gold price has triggered a gold mining investment spree since 2003.

The effect of newly-added investment towards gold price will come to the surface in 2009. Investment in mining exploitation increased 600% globally during the 2002-2006 period.

Since the beginning of this year, as much as USD 6 billion has been poured into exploitation of metal and valuable metals, setting up a new record high.

Global gold output is out of balance as traditional gold suppliers such as the US, South Africa, and Australia are witnessing shrinking resources and supply-and-demand tension, while emerging gold producers like China and some countries in Latin America are seeing mounting gold output, says Liu Shan'en, director of Beijing Gold Development and Research Center.

Sustained investment in low-end iron ore smelting technology helps these emerging gold suppliers boost up their gold output. Since 2005, China's gold output has been growing in a two-digit pace.

Besides proliferation of investment, gold price hike also stimulates mergers and acquisitions among multinational mining companies, leading to centralized resources held by few major mining companies.

Profits from gold price increase are much higher than the enlargement of exploitation costs. As the world mining industry is booming, mergers and acquisitions in the industry once again have been put under the limelight.

So far, total volume involving mergers and acquisitions around the world has reached USD 300 billion, and deals among gold mining companies accounted for the majority of the total purchases.

Mergers and acquisitions among gold mining companies will support gold price in a relatively high level, but the resistance will be limited, because the gold mining industry is more scattered than iron ore and copper mining industries, with output of the top five gold mining companies merely taking up 33% of the global gold output, according to Gu Haipeng, an analyst from Jingyigold.

What is more, unlike iron ore and copper, gold is the buyer's market. And the effect of newly-added investment towards gold price will come to the surface in 2009, forecasts Mr. Gu.

Gold is a tangible asset and investors who can afford to buy gold view it to be a safer bet than investing in stocks, especially in times of economic uncertainties and to hedge against the weakening dollar.

Commodities such as crude palm oil, perishable and non- perishable items, finished goods, raw materials and semi finished goods were now generally trading at high prices because of surging demand from India, China and the developed world.

From cnstock.com, Page 1, Monday, March 24, 2008 info@SinoCast.com

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