To:Bobby Yellin who wrote (122)
From: John Barendrecht Saturday, Jun 21, 1997 10:44 PM
Respond to of 79911
Gold slumps to four-year low
By PAUL BAGNELL
Mining Reporter The Financial Post
The price of gold slumped again on Friday, hitting its lowest level in more than four years.
ÿExperts said it may not be long before some of the world's higher-cost gold mines begin curtailing production because of low prices.
ÿGold closed Friday at US$337.70 an ounce in New York, down US$2.80 from Thursday. Friday's price was the lowest since March 30, 1993, when it dipped to US$337.
ÿExperts blamed the fear of more gold sales by central banks in Europe.
ÿEarlier this week, the central bank of Belgium said it might sell more gold, sparking concerns European central banks are becoming more willing sellers.
ÿPierre Lassonde, president of Toronto-based Euro-Nevada Mining Corp., said the worry created by the expectation of central bank sales is usually not justified by the actual amount of gold put on the market.
ÿHowever, gold traders said several large commodity funds sold bullion Friday, mainly on the fears of more gold becoming available from Belgium.
ÿThe low-inflation economic climate in western economies further dampens the prospects for stronger gold prices, the traders said.
ÿ"The game in town is the stock market," said John Ing, president of Maison Placements Inc. in Toronto.
ÿBoth Ing and Lassonde said the impact on gold producers is dramatic. "No one is making money," Ing said. "We are quickly approaching the time when we are going to see the closure of some high-cost mines."
ÿLassonde predicted mining companies will soon begin closing sections of mines, both open pit and underground, where production costs are higher.
ÿ"The producers are really going to be squeezed. At some point, production is going to be affected."
ÿAt Friday's gold price, Lassonde said, the 15 lowest-cost gold mines in South Africa are operating only at break-even levels.
ÿThe average cost of production in South Africa is US$429 an ounce, making most mines in the world's dominant gold-producing country uneconomic.
ÿWorldwide, the average cost of production was US$317 in 1996.
ÿTina Messina, chief dealer at Royal Bank of Canada in Toronto, said in recent weeks, gold trading had shown a flurry of buying each time the price touched US$339.
ÿWhen that threshold was broken on Friday, a sharp drop became inevitable.
ÿMessina predicted gold may soon be selling for US$335 an ounce.
ÿ"A lot of put options have been bought, so it seems the sentiment is really going bearish," she noted
ÿPut options allow investors to sell at a fixed price in the future. In effect, they are a bet gold prices will sink further.
ÿ"Right now, this market has no reason to go up and every reason to go down."
Market Data 
Markets 
AI
