Despite current market conditions and commodity prices, 2008 was a strong year for gold.

The price of gold started at US$846 on Jan. 2 and averaged over US$800 for the year, according to the annual PricewaterhouseCoopers (PwC) Global Gold Price Survey, which was released Thursday.

“While other commodities and the economy have trended down, gold has held its value,” says Paul Murphy, leader of the Canadian mining practice at PwC. “Gold is serving its purpose as a hedge of wealth in uncertain times.”

There was significant intra-period volatility in the gold price over the year ranging between US$712 and peaking at US$905 in September. In early December, when the survey was conducted, prices retreated somewhat to US$764.

Of the companies surveyed, 62% have determined the gold price assumptions that will be applied to ongoing reserve determinations and carrying values at December 31, 2008. The average price indicated by respondents is US$734 for reserves and US$751 for carrying values (2007: US$575 for reserves and US$640 for carrying values).

According to the survey most companies (69%) plan to use the same prices over time. Of those planning to use variable prices over time (20%), the average prices reported are trending downwards in the long term — US$787 in 2010 and US$732 in the long term.

A smaller percentage of this year’s respondents are disclosing price assumptions in determining reserves and carrying values this year (reserves — 62% in 2008 compared to 79% in 2007; carrying values — 31% in 2008 compared to 50% in 2007).

Despite the market and commodity price volatility during the past year, most companies reported no expected changes to their long term production levels; one third of those surveyed indicated that their production levels would increase. However, production is expected in 2008 to be 33.34 million oz. versus 2007 production of 34.63 million oz.

Of the companies surveyed, 64% have updated their mine plans significantly to reflect escalating input costs. Due to the credit crunch, companies report that raising capital has become increasingly challenging in 2008. A full 60% commented that it will be more difficult to secure financing and 28% expecting they may not be able to obtain financing at all in the near term.

The survey polled 45 of the leading gold mining companies from North America, Australia and South Africa. The annual survey examines what gold price gold mining companies have used to assess carrying values, the issues that have influenced their determination and disclosure that is planned for their 2008 annual reports.

IE