To:John Barendrecht who wrote (165) From: John Barendrecht Friday, Jun 27, 1997 10:09 PM Respond to of 79916
NY precious metals end lower, led by gold slide NEW YORK, June 27 (Reuter) - Gold prices slumped to a four-and-quarter year low at $334.00 an ounce Friday, leading COMEX and NYMEX precious metals futures down across the board, traders said.
``We've seen good Australian producer hedging this week, continued fund selling, and the execution of some stop loss orders around $336.00 in the bullion market,'' Credit Lyonnais Rouse's New York chief bullion dealer, Scott Mehlman, said.
``With the Hong Kong market closed next week for a holiday, there aren't going to be the usual buyers around either, so gold prices will probably go lower still,'' he said.
Commodity fund selling has accelerated this week as the four year low at $336.00, seen in January this year, came under pressure again, while Australian gold miners took advantage of a slide in the Australian dollar to hedge their positions by selling more gold forward, bullion dealers said.
Overnight some liquidation of long positions in Hong Kong ahead of the holiday weekend there also contributed to the slide, traders said.
The Hong Kong gold market is closed until Wednesday next week due to the historic handover of the colony from Britain to China on Monday June 30.
Meanwhile, Indian gold demand is seen seasonally weak heading into the monsoon months also. India is the largest gold consuming country in the world, with demand estimated at 507.8 tonnes in 1996, compared to 345.3 tonnes for the U.S., according to the World Gold Council.
COMEX August gold ended down $3.90 an ounce at $335.90, after seeing a new low for the August contract at $335.20.
COMEX gold open interest jumped a further 3,695 lots to 188,818 contracts Thursday, the highest level since February, as funds built an even larger net short position.
Technically, the momentum of the downtrend has begun to increase this week with a standard 14-day ADX momentum indicator edging up to 22 pct at the close.
In the bullion market, spot gold ended quoted $334.30/80 an ounce, compared to the London Friday afternoon fix at $336.55 an ounce, and the New York close Thursday around $338.50/00.
Gold mining stocks also suffered Friday with South Africa's All Gold index (.JGLD) falling further to close at 687.80.
But the Philadelphia Stock Exchange's index of North American gold and silver stocks (.XAU) fell to only 94.80 points, holding above a low of 94.12 seen Monday, and a low of 90.78 points on April 28 this year.
In the past 18 months, the price of gold has slid from a seven year high at $417.70 an ounce, to Friday's low at $334.00, the lowest level since March 1993, when a low of $325.10 was seen.
Gold bugs have been in hibernation recently with surging world equity markets, a strong U.S. dollar, and low inflation providing little incentive for investors to diversify into gold, analysts said.
In addition, the threat of further European central bank gold sales in preparation for European Monetary Union has overhung the market, after a 300 tonne sale by the Netherlands in January this year.
But some analysts believe the sharp decline in gold prices may not be sustained, as gold prices are now below the cost of production at some mines in South Africa and Australia.
Average world gold mine production costs are around $317.00 an ounce, but some mines in South Africa have average costs around $334.00 an ounce and some in Australia have costs of $358 an ounce, German bank West LB said in a report Friday.
Demand for gold by the jewellery industry has also been rising with world gold demand at a record 770.6 tonnes in the first quarter 1997, up 17 percent on the first quarter 1996, according to the World Gold Council.
Silver prices were dragged lower by the falling gold price also, with COMEX September silver ending down 6.5 cents at $4.725 an ounce, near the bottom of its $4.70-4.90 range of the past two months.
But the spot gold/silver ratio edged up to 71.1:1 from a recent low at 70.4:1 on June 23.
Meanwhile the ongoing absence of Russian platinum and palladium supplies meant platinum group metals (PGMs) prices managed to hold up relatively well, analysts said.
NYMEX October platinum ended down just 50 cents at $406.50, though NYMEX September palladium lost $5.20 to close at $176.20 an ounce.
Russian officials said earlier this month that Russian exports of PGMs, suspended for six months, would resume in late June, but traders now expect deliveries to arrive in early July. Russia supplies about 60 pct of the world's palladium and 20 pct of its platinum.
The acute shortage of metals in the physical market has kept lease rates abnormally high, though short term rates have eased slightly this week, refining sources said.
One month platinum lease rates were seen around 55 pct Friday, while one month palladium rates were around 85 pct.
Manufacturers of catalytic converters, used in automobile exhaust systems to control pollution, reported sufficient platinum and palladium available in the leasing market to avoid production cutbacks in the next few weeks.
High lease rates have encouraged the supply of metal from remaining world inventories, analysts said.
However, refiner Engelhard Corp sent out a letter to its customers recently advising it would strictly enforce its pool account policy, meaning the refiner would not be able to lend metal to customers for refining, sources said. http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=1672802
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