Gold made a promising start to the year, with prices crossing $1,300 an ounce in January. However, since February, gold prices have seen a sharp pullback. Prices are well below $1,200 an ounce level now.
Gold prices have been driven lower by a stronger dollar. The U.S. dollar has been strengthening since the start of this year amid speculation that the Federal Reserve will start hiking rates soon. Indeed, overall stronger economic data in the U.S. has further fueled the speculation.
Globally, there is also deflationary pressure. Gold has been traditionally seen as an inflation-hedge.
However, the precious metal’s appeal has been dented by the threat of deflation in Europe. Even in the U.S. and China, inflation levels are well below the targeted rate due to lower oil prices. In addition to these factors, weak demand for physical gold in China and India is also weighing on prices.
In China, anti-graft measures have hurt the sales of luxury goods and jewelry. In India, import duties on gold have kept demand in check despite lower prices.
Based on these factors, the outlook for gold prices is gloomy. There is a possibility that the precious metal could soon lose the $1,100 an ounce support level. Even if gold finds support at this level, it will remain rangebound.
In a low price environment, the key for gold miners will be to continue to bring down their all-in sustaining costs and undertake projects that have lower costs. In this regard, the low all-in sustaining costs announced by Golden Reign Resources Ltd. (TSX-Venture:GRR), a Vancouver-based mineral exploration company, for its project in Nicaragua is a huge positive.
This morning, Golden Reign, which has exploration and evaluation assets in Nicaragua, reported key information from a Preliminary Economic Assessment (PEA) for its San Albino Gold Deposit. The deposit is located in the San Albino-Murra Property, which is 100% owned by GRR.
The PEA has indicated all-in sustaining costs of just $460 an ounce and average grade of 8.02 g/t AuEq.
This is very significant for GRR as lower all-in sustaining costs mean that the company can easily move forward the project even in the current price environment.
Kim Evans, President and CEO of Golden Reign, said that the San Albino Gold Deposit is a low tonnage, high margin gold project and the company’s strategy is to establish a financeable, low-cost, profitable cornerstone operation at San Albino.
