CANADIAN MINING PERSPECTIVES: Gold, oil break records as 2008 opens

Gold traded as high as $865/oz on Jan 4, before falling back to $863 at the close. The previous record close was $8...


Gold traded as high as $865/oz on Jan 4, before falling back to $863 at the close. The previous record close was $850/oz attained on Jan. 21, 1980. Faced with double-digit inflation in the United States and war between two oil-producing Mid East states (Iran and Iraq), 27 years ago investors sought gold as a hedge against catastrophes that were all too easy to imagine. Today's gold price is supported by genuine industrial demand, be it jewellery or high-tech applications. The price of silver ($15.40/oz) and platinum ($1,250/oz) are taking advantage of the same upward support.

The price of crude oil has topped $100/bbl for the first time in history. Closing prices fell off about a dollar, but it looks like expensive oil is here to stay. We have called oil "expensive" before, but the triple-digit price marks a psychological watershed. The high price is good for Canadian producers, particularly the Alberta oil sands where new projects come with multi-billion-dollar commitments. This country is a net exporter of oil.

The Canadian dollar has shown remarkable strength against its U.S. counterpart. The highest exchange was Cdn$1.00 for US$1.09 reached in the first week of November 2007. At the end of trading Friday (Jan. 4) the two dollars were virtually the same. Not since the 1970s have they traded at par. That's good news for Canadian consumers, many of whom indulged their holiday shopping habits south of the border.

Fortunately, the strong metals and minerals prices have translated into strong bottom lines for almost all mining companies; moreover, record amounts have been spent on exploration. Investors are smiling, and bottom lines are awash with black ink.

So here's to a new year. May the mining industry continue to prosper.


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