To:Bobby Yellin who wrote (281) From: John Barendrecht Monday, Jul 7, 1997 3:18 PM Respond to of 80032
Gold sinks to 12-year low; jittery speculators rush to sell Monday July 7 12:38 PM EDT NEW YORK (Reuter) - Gold sank to fresh 12-year lows Monday in a wave of selling by speculators frustrated at the market's inability to hold its ground, and the price collapse is starting to take its toll on the mining industry. In active trading, the August gold futures contract was off $5.30 to $319.90 an ounce on New York's Commodity Exchange, a level unseen since 1985.
Gold has fallen 13 percent, or $50 an ounce, so far this year under continued selling by central banks.
The latest plunge came after the Reserve Bank of Australia announced Thursday that it had sold 167 metric tons of gold from its reserves.
The sale of 60 percent of the Australian central bank's gold hoard sent an especially bearish signal to speculators because Australia is the third largest producer -- at 289 tons last year -- after South Africa and the United States.
Market sentiment is overwhelmingly bearish, however, and traders are forecasting the price could slump to $300 or lower.
In London, spot gold briefly dropped to $313.90 an ounce, compared with Friday's London close of $324.25/324.75 when the New York market was closed for the Independence Day holiday.
But a modicum of support was evident at $315.00 an ounce, and speculators who had bet on a bigger drop bought back some of their gold.
As a result London gold was fixed barely changed at $318.00 an ounce vs. $318.75 during the Monday morning fixing session.
``The New York market opened way below where it closed (on Thursday), so the first thing people did was get out,'' said a London-based dealer. ``There is some support at $315, but it's hard to tell how much -- we haven't seen these levels for 12 years.''
The stocks of mining companies were also hard hit, and the category was the worst performing group on the stock exchange.
Barrick Gold Corp. fell $2.44, or 11 percent, to $19.50; Newmont Mining Corp. lost $2.25 to $35.625;Homestake Mining Co. was off 62.5 cents to $12.375 and Echo Bay Mines lost 56 cents to $5.25.
The collapse began to take its toll on the mining industry when one South African mine was shut because prices are so low. South Africa's East Rand Proprietary Mines said it would halt work at its Benoni Gold Mining Co. Ltd.
``It's very, very bad news. They are calling it down to below $300 (an ounce) and if it does go to that, there will be only three, four or maybe five mines in South Africa,'' said Leon Esterhuizen, an analyst at Societe Generale Frankel Pollak.
But analysts were wary of predicting a solid rebound.
``It would take a Martian to be bullish at this point,'' said Andy Smith, who tracks precious metals for Union Bank of Switzerland.
Some dealers say gold could fall to the 1985 low of $287.25, which they say could be reached shortly on fears that other central banks might unload some of the 35,000 tons of gold that are held by government institutions around the globe.
Gold sank back in 1985 in tandem with a collapse in the price of oil.
Bullion had tracked oil higher, to reach a record $850 an ounce early in 1980, when it was seen as an investor refuge from the inflation that had been triggered by the OPEC oil ``shocks'' of the 1970s http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=1714990
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