To:Bearcatbob who wrote (203)
From: John Barendrecht Friday, Jul 4, 1997 10:58 PM
Respond to of 79916
Gold crashes to 12-year low
News that Australia has been unloading bullion in a big way sparks market rout; analysts predict the price collapse still has some way to run
By PAUL BAGNELL
Mining Reporter The Financial Post
The market for gold turned from dismal to ugly yesterday, as the price of bullion hit a 12-year low and experts predicted more declines are on the way.
ÿTraders and analysts blamed yesterday's startling price drop on the unexpected news that Australia has sold 167 tonnes of gold over the past six months.
ÿIn New York, the cash price of an ounce of gold for July delivery fell US$7.10 to US$324.20 after a half day of trading on the Comex exchange. At one point, the price slid as low as US$323.65.
ÿThat was the lowest price since Feb. 25, 1985, when it dipped to US$284.25.
ÿTraders said yesterday's abbreviated trading day may have contributed to gold's demise. U.S. exchanges closed about 1 p.m. eastern time yesterday, in advance of today's Independence Day holiday.
ÿThe gold price has been crumbling steadily in recent months. On June 4, the metal was selling for US$341.25 an ounce, while on Feb. 28 it traded at a six-month high of US$363.45.
ÿYesterday, traders and analysts couldn't point to a single positive sign in the gold market.
ÿThe Australian announcement, they said, came as a big surprise.
ÿThe Reserve Bank of Australia said it saw "negligible benefits from holding a significant proportion of its international reserves in the form of gold," given the country's status as a major gold producer.
ÿAlthough the market has been facing the prospect of more European central banks selling some of their gold -- following sales by the Netherlands in January and Belgium in March 1996 -- Australia had not been expected to join the group.
ÿ"No one imagined we were going to get this news out of the Australians," said Victor Flores, a Texas-based gold analyst for Marleau, Lemire Inc. of Montreal.
ÿ"It's pretty shocking that even a big gold producer doesn't care about protecting the gold price."
ÿAside from the selling pressure spawned by the fear of further central bank sales, the bright outlook for competing investments such as equities and the US$ are also dampening gold's prospects.
ÿ"The overall atmosphere for gold is not good," said Walter Baici, a gold trader at Bank of Nova Scotia in Toronto, citing recent gains in bonds and a declining oil price as even more bad news for gold.
ÿCentral bank sales have spooked the market because the banks had traditionally been among the long-term holders of bullion, Baici said.
ÿMartin Murenbeeld, a gold analyst in Victoria, B.C., said stepped up short selling of gold by speculators is another likely factor behind the recent price collapse.
ÿ"The latest data I have is that the large specs are heavily short, and it's almost certain that they have increased their short position in recent days," Murenbeeld said.
ÿ"And there is enough fundamental evidence to suggest that is not a bad position."
ÿThe share prices of gold producers on the Toronto Stock Exchange were also down sharply. The TSE's gold and precious minerals subindex dropped 207.11 points, or 2.49%, to 8126.53.
ÿAmong the biggest losers were Royal Oak Mines Inc. (RYO/TSE), which fell 20› to $2.95, a decline of 6.3%, and Bema Gold Corp. (BGO/TSE), which suffered a 6.5% decline, falling 55› to $7.90.
ÿFlagship stocks Barrick Gold Corp. and Placer Dome Inc. were also down. Shares of Barrick (ABX/TSE) eased 65› to $29.45, while Placer Dome (PDG/TSE) fell 60› to $21. 80.
ÿThe selloff of gold stocks could have been worse, said John Ing, president of Maison Placements Inc. of Toronto.
ÿ"I think we reached the capitulation stage earlier," Ing said. "Most portfolio managers I've talked to have already lowered their [gold-related] weightings."
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