The potential is still there for the gold price to go much higher, with a prediction from Perth broker Hartleys that it could go above $1000 an ounce.
The potential is still there for the gold price to go much higher, with a prediction from Perth broker Hartleys that it could go above $1000 an ounce.
At the Paydirt Gold conference in Perth, Hartleys' Director - Corporate Finance, Mr Martin Pyle, said the $1,000 plus price was not unrealistic, but warned against the high price leading to dysfunctional hedging decisions.
"The heated price environment is directly linked to increasing global inflation," Mr Pyle said.
That view supported an earlier comment by South African gold minier Gold Fields Ltd's business development director John Munro said the buying of gold by central banks, steady jewellery consumption and declining mine supply would push the price higher.
"We can see substantial upside in the gold price from where it is today,"said Mr Munro.
The outlook for jewellery consumption in India and China in particular was robust, he added.
At the opening of the conference, Resources minister John Bowler said gold had played an important role in the state's mining sector but there remained a lot more to do.
"Gold has been a star performer for the WA economy and I think it has got a great future in this State," Mr Bowler said.
"When it comes to gold, one of the most important things to remember is that Australia is still the world's second biggest producer, after South Africa, and that WA still accounts for most of our national production."
The minister said gold had historically been the biggest contributor to WA's resources sector but recent times saw a relative decline in its position, partly due to the very big expansions in petroleum, iron ore, nickel and, to a lesser extent, alumina.
However, the state had reversed a downward production trend of recent years, partly driven by rising gold prices, with gold production increasing by three per cent in 2005 to 169 tonnes.
"Whether this reversal signals the start of a long up-trend for gold remains to be seen," Mr Bowler said.
The minister flagged the growth of Telfer to 800,000 ounces a year, and the green light for Boddington's plan for 700,000 ounces a year, as positive signals.
"The measure of our success will be the extent to which government and industry can work together to improve the business climate for industry development," he said.
From a state perspective, among the most important things which have been achieved in conjunction with industry, are substantial reforms to regulations, implemented through amendments to the Mining Act. The reforms are based on the findings of the Keating Review of approvals processes and the Bowler Report into greenfields exploration.
Mr Bowler said high levels of exploration were needed to ensure the sustainability and growth of the sector.
"Within an improving environment, if we can work together to develop and implement reforms, the gold industry is much better placed to maximise emerging opportunities," he said.
Below is a release from Hartleys:
Broking house, Hartleys Limited, says equity markets should prepare for a gold price north of A$1,000 per ounce - compared to today's price of around A$825 per ounce.
Addressing the 2006 Gold Conference in Perth today, Hartleys' Director - Corporate Finance, Mr Martin Pyle, said the $1,000 plus price was not unrealistic, but warned against the high price leading to dysfunctional hedging decisions.
"The heated price environment is directly linked to increasing global inflation," Mr Pyle said.
"While the man on the street has noted that inflation is live and well, even central banks are starting to take pre-emptive actions to raise interest rates in order to try and curb inflationary expectations.
"However, the rise in the gold price is telling us they may not yet have done enough to quell investment demand for gold as a hedge against possible harder times ahead."
Mr Pyle said that as the price of gold continued to rise, expect to see old Australian gold mining centres re-open for business.
"As it rises further, the majors will continue selling non-core assets resulting from consolidations and the sector will be flooded with the commencement of more 'small scale follow your nose' mining ventures," Mr Pyle said.
"Such ventures can be a risky business but there is a margin available in current spot prices hovering in the high $A800-A$1,000 bracket.
"The record price environment will also see more cross-border activity with merger and acquisition activity in the mid-tier and junior sectors as North American companies buy into Australian gold mining and exploration companies.
"Mining exploration floats will also target larger but higher risk/reward projects."