To:Mark Kubisz who wrote (262)
From: John Barendrecht Monday, Jul 7, 1997 9:52 AM
Respond to of 80032
Gold extends its slide
By Brian Spoors
LONDON (Reuter) - New shock waves hit gold Monday following the disclosure last week that Australia had sold bullion from state reserves, and in South Africa one mine was already being shut because the price has dropped so far.
The price of gold was fixed in London at $318.75, its lowest since December 1985 and down from Friday's London close of $324.50.
The price collapse to 12-year lows -- down some $50, or about 13 percent, since January -- fuelled anger in the mining industry as well as anxiety about the future of some mines.
South Africa's East Rand Proprietary Mines said it would halt work at its Benoni Gold Mining Co. Ltd as soon as possible and put it on a care and maintenance basis because of the low price and losses at the mine. East Rand is a unit of Randgold and Exploration Co. Ltd.
``It would take a Martian to be bullish at this point,'' said Andy Smith, precious metals analyst at Union Bank of Switzerland.
The sale of 167 tons of gold by the Reserve Bank of Australia followed disposals earlier in the 1990s by the Belgian and Dutch central banks.
It stampeded already-jittery investors into a sell-off, for fear that more of the 35,000 tons of gold owned by institutions may be unloaded in the future.
The sale, which cleaned 60 percent of the Reserve Bank of Australia's gold from its vaults, sent an especially bearish signal to the market because Australia is the world's third-largest producer -- at 289 tons last year -- after South Africa and the United States.
Bullion dealers expectedinvestor selling to step up this week. The U.S. Independence Day holiday last Friday may have only postponed some of the unloading, they said.
``Expect an orgy of selling over the next few weeks,'' one dealer said, adding that he felt this way despite a previous view that the price was about as low as it could get this time round.
``Now we might go to under $300 but if we do, mortgage your house and get into the market,'' he said.
In industry reactions, Australian gold miners pressed the World Gold Council, a producer lobby group, to make a statement criticizing the action of their country's central bank.
The WGC expressed deep concern, saying that the sale seemed to be ``motivated by narrow financial considerations.''
``For a leading gold producer to take unnecessary actions that prejudice the well-being of a key sector of its economy suggests a lack of sensitivity to the factors impacting the market,'' it declared.
WGC chief executive officer E. M. Hood said the weak price would put additional pressure on member companies, several of which were in the council's hardship category even before the latest price slide.
``We expect others to follow with prices at these levels,'' he said.
Stockbroker T. Hoare and Co.'s mining equities analyst, Roger Chaplin, calculated that many gold miners are already suffering at prices around $320.
Yet some dealers see the market's likely downside target as far down as the 1985 low of $287.25 which they say could be reached shortly.
Gold sank 12 years ago in tandem with a collapse in the price of oil. It had tracked oil higher, to reach a record $850 an ounce early in 1980, at a time when it was seen as an investor refuge from the inflation triggered by the OPEC oil ``shocks'' of the 1970s
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