<<"Unmanaged sales at this stage would be disastrous for the future of the gold industry," warns South Africa's Finance Minister at the World Economic Forum meeting in Durban. Manuel points out that there is still a gap between what is mined and the total demand for the precious metal. Further shocks to gold's price may come if the IMF decides to go ahead with its plan to sell the metal to finance debt relief for poor countries. The Minister notes that "now, we are dealing with a different price paradigm," but he warns that further gold sales would be illogical: "You are weakening the value of the reserves throughout the world, and that cannot be to anyone's benefit." He adds: "Here in South Africa where so many of our mines are marginal, we face a lot more pressure."
Supporting Manuel's contention, East Rand Propriety Mines is expected to file for bankruptcy today, threatening 5,000 jobs. South Africa has set up the Gold Crisis Council, a body made up of employers, government, and labor, to help the industry deal with lower prices. Gold companies have proposed some 8,000 redundancies to the council. South Africa's unemployment rate is estimated to be around 27%.
However, some analysts are upbeat about today's auction despite the plunge in gold prices. Frank Abbot, financial director at Harmony Gold Mine: "We are very positive about the outcome. We believe that it has proven that the market can absorb the gold sales. The Bank of England's total gold sales -- 125 tonnes -- only represents about 3% of total gold holdings. It has been the negative sentiment more than the reality that has driven the gold price down." Harmony Gold Mine is among the world's top 10 gold producers.
African Merchant Bank Securities mining analyst Paul Smith is positive as well: "Oversubscription of the auction is one thing. It might be the indication of where the market sees the value of gold, which is positive for now. Instability will always be there as people take different views. The overall trend I am looking for is an upward one as sentiment might now pick up."
The gold industry is not so sanguine. Bobby Godsell, chief executive of Anglogold blasts the Bank of England: "I deplore these sales.... None of that gold should come onto the market now. If countries and international institutions have found [gold reserves] good enough to hold over the last couple of centuries and certainly the last four or five decades, I think this point in the commodity price cycle is the worst moment to sell."
By Miranda Maxwell and I-Net, BridgeNews >>
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