As big gold producers see shares slide Thursday amid lower metals prices and the continuing uncertain global economic backdrop, there is some hope on the horizon for companies in the sector, at least according to one junior miner's CEO.
A rise in the US dollar and continued pressure on crude has contributed to a slide in the gold price today. Gold was last down 0.73% at US$1,272.05 per troy ounce.
And the US$1,300 range around which gold traded for much of February and March now appears to be a thing of the past as analysts are now looking once again more to the downside than to the up, with some citing US$1,260 as the next support level.
Fresh from releasing first-quarter results, a period where production increased, Yamana Gold Inc (NYSE:AUY) shares are down 4.7% to US$2.05 on the day, Barrick Gold Corp (NYSE:GOLD) is down 0.7% to US$12.49. Goldcorp (TSE:G) is 1.6% down in Toronto.
Speaking to Proactive late last month, Jason Reid, CEO of Nevada and Mexico-focused Gold Resource Corp (NYSEAMERICAN:GORO) conceded that market volatility created challenges for companies.
But he noted that the cyclical nature of the metals means there could be light at the end of the tunnel for firms and investors.
"It has been about seven years of a bear market in a metal space that often sees seven to eight-year cycles between bear and bull markets. For the contrarian long-term investor, I believe the precious metal space is an opportunity. All the problems and issues that triggered the last market crash in 2008 are not only still intact but arguably even larger like the unsustainable and growing global debt."
Gold, he said, provides a hedge against political turmoil, debt and global unrest, which is perhaps why the central banks around the world are quietly accumulating physical gold.
"Gold miners provide additional leverage to movements in metal prices. Gold Resource Corporation’s near-term catalysts don’t require gold to move up to see a market re-rating.
"When the next bull market in gold begins that would be an additional catalyst and leverage."
GORO has a market cap of $221 million and recently hit a major milestone with first gold production from its Isabella Pearl mine in Nevada ahead of schedule.
Contact Giles at [email protected]