Dear Gemsearcher,
The following is from Charles Wyatt's minesite, minesite.com
Have a great week-end.
Crudestope.
SUPPLY DEFICITS IN PLATINUM AND GOLD, BUT WHO DARES FORECAST PRICES?
There is good news for both the gold and the platinum markets. Perhaps
platinum should take precedence as it is a genuine supply/demand market,
whereas gold is smudged by hedging and by the simple fact that producers
have so little confidence in the impact of basic demand on price that
they rush to sell production forward.
It is the Russians who have put a minor rocket behind the price of
platinum by making a bureaucratic blunder of epic proportions. Clause 19
in the Budget and Tax Law passed last December restricted exports of
platinum group metals to "state organs" only. The state export agency,
the ministry of finance and the central bank are the usual exporters,
but none fit this description, nor does Norilsk, the major mining
company. As a result Johnson Matthey is now forecasting a 38 per cent
fall in Russian shipments.
On the plus side, Anglo American Platinum is increasing output from its
upgraded concentrator capacity at its PP Rust complex and open-pit
recovery from its new Bafokeng Rasimone platinum mine; Lonmin is also
expanding production through Lebowa and Amandebult; and the new Kroondal
mine owned by AIM listed Aquarius Platinum is also commencing
production.
Adding all this up, however, making due allowance for a reduction in
supply from the Stillwater mine in North America and the Hartley mine in
Zimbabwe, and Johnson Matthey is confident of a net deficit and is
predicting a price range of US$370 to US$440 per ounce compared with its
May forecast range of US$350 to US$390.
It is not so easy for the gold bugs to make forecasts on the gold price.
Many have tried, but few have ever got it right. And as long as
producers such as Barrick continue major hedging programmes this will
continue. Pressure is being exerted by analysts, however, who say they
want to be able to get a clear view on gold sale prices unbesmirched by
forward sales or exotic derivative trading. And many find Barrick?s
statement that it will always be able to outperform the spot price of
gold hard to take. "Always" is an unwise claim in investment. Remember
Lloyds members who were "always" going to get a good return on their
money.
Even so, the background for gold is encouraging. The latest figures from
the World Gold Council show that demand from the countries which it
monitors was 877 tonnes in the third quarter ? an all time high for any
three month period and 8 per cent above the previous peak. Demand for
the first nine months of the year is therefore 2,472 tonnes which is way
above the same period in 1998 when the financial crisis in the Far East
was having an inevitable effect.
Asia is now recovering fast and the Chancellor would be well advised to
keep an eye on the importance placed on gold out there. Twice he has
sold part of our gold reserves at a poor price and his spin doctors have
rescued him. A third time may be too much and he might even be
criticised in the Financial Times.
18 Nov 1999 |
