Gold price surges to highest in a year

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BornOil has been quietly building up its gold inventory. Today it now stands at some 544.58 kgsBornOil has been quietly building up its gold inventory. Today it now stands at some 544.58 kgs

A while back, Business Circle ran a report, Time to invest in gold, explaining how many investors view the precious metal as a safe haven and one that is relevant when there is potential for high inflation, economic uncertainty, or currency depreciation.

As it stands, that was what happened since we published the report. Gold prices have been on the rise amid concerns about the global economy and stock market uncertainties throughout the world.

One company, however, that has been quietly building up its gold inventory is Borneo Oil Berhad (“BornOil”) which we also happened to cover last year in our report, BornOil rises from the ashes.

At that time, Business Circle touched on how BornOil was expanding on its gold-mining activities. We had interviewed the company’s executive director Raymond Teo who explained (at that time) that: “BornOil was entering the gold industry at a most opportune of timing with low entry costs which augurs well for long-term sustainability and profitability.

1 year gold price in USD over ozBornOil’s entrance into the gold industry couldn’t have been better timed as gold prices have currently soared to its highest levels in over a year. (See chart. Photo credit: goldprice.org)

The company’s bet on building up its gold inventory appears to augur well for its fundamentals: Gold backing per share continues to rise and now equates to some 21% of its current share price of 14 sen.

In a statement to the stock exchange this evening, the company said that its gold inventory currently stands at some 17,507.75 ounces (or 544.58 kgs).

Based on current gold price per ounce of US$1,240 (US$1 = RM4.23), this then translates into an inventory valued at approximately US$21.71 million or RM91.83 million. And with BornOil’s issued capital currently standing at some 2.973 billion shares, this the gives rise to 3 sen per gold backing.

“Our goal is to further increase our gold backing per share,” Teo further explained.

“Last year, we made the strategic decision of venturing into the gold industry and it’s made our fundamentals even stronger than ever before with rising gold prices,” said Teo. “We are optimistic that gold prices would continue to head upwards.”

Gold as a ‘safe haven’ due to current uncertainties

Globally, investors have been seeking out gold as a “safe haven” due to uncertainty in stock markets, coupled with the move to negative rates from some central banks.

“Investors are piling into gold, seeking shelter amid concerns that a turn toward negative interest rates in some countries is threatening to destabilize the global financial system,” according to a report in The Wall Street Journal entitled “Gold is biggest beneficiary of negative interest rates”.

Negative interest rates mean that banks are charged for keeping cash in certain kinds of accounts at a country’s central bank. That policy is intended to dissuade banks from parking idle cash; hence, encouraging banks to pump money into the economy by making loans.

Meanwhile, gold-backed exchange-traded funds (ETFs) have recorded net inflows since the start of the year, signaling renewed investor interest, reported Reuters via Yahoo Finance.“Investors are returning to gold as a core diversifier and safe haven investment,” James Butterfill, head of research at ETF Securities, reportedly said in a note. “Given the increasingly challenging investment and economic environment, we expect this trend to continue.”

“Investors are returning to gold as a core diversifier and safe haven investment,” James Butterfill, head of research at ETF Securities, reportedly said in a note. “Given the increasingly challenging investment and economic environment, we expect this trend to continue.”And should this trend continue, one company stands to benefit handsomely. That company is BornOil, and kudos to them for having the courage to catch a falling knife all those months ago to now reap the rewards of soaring gold prices.

And should this trend continue, one company stands to benefit handsomely. That company is BornOil, and kudos to them for having the courage to catch a falling knife all those months ago to now reap the rewards of soaring gold prices.

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