Gold Prices Slump to 20-Year Low After Bank of England Auctions 25 Tons
By Mark Deen and Dudley White
Gold Slumps to 20-Year Low as U.K. Auctions 25 Tons (Update1)
(Adds gold producers' comment from 5th paragraph.)
London, July 6 (Bloomberg) -- Gold fell almost 2 percent to
a 20-year low after the Bank of England sold 25 metric tons of
the metal at a below-market price in a scheduled auction, the
first of five that traders expect in the next nine months.
The bank sold the gold for $261.20 an ounce, a 0.4 percent
discount on the price when bidding closed, raising $209.8 million
that the U.K. will invest in bonds. The government joined other
gold-holders, such as Australia, Belgium and Canada, which have
shed the metal in favor of assets with higher returns.
''It was a huge disappointment,'' said Frederic Panizzutti,
head of strategy at MKS Finance SA, a Geneva-based metals refiner
and trader. ''People were hoping they would sell above the spot
price and unfortunately they didn't.''
Gold dropped as much as $5.20, or 2.0 percent, to $257.05 an
ounce in London, its lowest since May 1979. In New York, gold for
August delivery fell as much as $7.10, or 2.7 percent, to $257.50
an ounce on the Comex division of the New York Mercantile
Exchange, its lowest price since May 18, 1979.
Gold's slump -- it's down by a about a third since the
beginning of 1996 -- has dragged shares and profits of gold
mining companies down with it. East Rand Proprietary Mines Ltd.,
a South African gold producer, will likely file for bankruptcy
today, a South African government official said, because it can't
make money at current prices.
''East Rand is certainly not the last in South African
announcements of this nature although it may be the most
spectacular,'' said Kelvin Williams, executive director of
marketing at Anglogold Ltd., the world's largest gold producer.
The Johannesburg All Gold Index dropped 25.4 points, or 2.7
percent, to 900.30.
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