Gold on a record-breaking roll – by Lisa Wright (Toronto Star – July 14, 2011)

Lisa Wright is a business reporter with the Toronto Star, which has the largest circulation in Canada. The paper has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion.

Gold prices have reached a new record high and are expected to top $2,000 U.S. an ounce later this year amid the recent flurry of anemic U.S. economic data and new fears that Europe’s debt crisis will spread.

“It’s pretty amazing. Gold is really the ‘it’ thing,” said mining analyst Barry Allan of Mackie Research Capital in Toronto. “I remember not long ago when it hit $500 and people were cheering about that,” he said.

After a steady climb from $1,495 on July 4, bullion shot up another $23.30 U.S. an ounce to close at $1,585.20 in New York Wednesday. And the gold bugs say it’s just a preview of more good times to come for the often fickle precious metal.

The last record high of $1,577.40 was set on May 2 before an abrupt pullback in precious metals that dragged gold below the key $1,500 benchmark.

But bullion is bouncing back again, with the next milestone of $2,000 widely predicted sometime this year as the U.S. dollar and the euro continue to slide and global economies hit the skids.

Meanwhile investors have taken a shine to gold in the form of jewelry and exchange-traded funds (ETFs) as a hedge against world-wide economic instability.

“It’s hit a new high every year for the last 10 years. Gold has become the default currency,” said John Ing, president of Maison Placements Canada Inc. in Toronto.

“There’s just a lack of clarity or faith in resolving the debt trap on both sides of the ocean,” noted the veteran gold bug.

The average price of the glamorous metal – traditionally the safe haven investment amid times of economic uncertainty – will reach “$2,011 in 2011,” predicts Ing.

Gold investment maverick Rob McEwen, chief executive of U.S. Gold Corp., goes much further, saying it will hit $5,000 by the end of the ongoing red hot resources cycle.

While the U.S. dollar plays a key role in the fluctuating gold price – the two tend to move in opposite directions with bullion priced in U.S. currency – monetary policy has the greatest impact on gold, analysts say.

After a golden decade that has seen the metal price jump more than 600 per cent from a low of $252 U.S. in 1999, speculators are still buying gold faster than the world’s biggest producers can crank it out.

It means established miners must find new discoveries – which is getting harder every year – or acquire existing mines owned by smaller companies to stay afloat.

More mergers are expected as a result, such as the one announced Wednesday between Vancouver’s Northgate Minerals Corp. and Toronto-based Primero Mining Corp.

The deal is valued at $409 million U.S. in stock and debt. The combined company will have a market value of about $1.2 billion and adds Primero’s San Dimas mine in Mexico to Northgate’s stable of operating assets.

“I think you can assume pretty safely that we’re going to grow this thing through acquisitions, there’s no question,” said Primero CEO Joe Conway, who will run the new company.

For the rest of this article, please go to the Toronto Star website: http://www.thestar.com/business/article/1024480–gold-on-a-record-breaking-roll