12/20/99 - Gold Price Deliberately Kept Under Us$325
Harare (The Insider, December 20, 1999) - The price of gold is deliberately being kept under US$325 an ounce because a price above this will cause havoc to bullion banks that have written call options on bullion. And once it breaks this resistance level it can easily shoot up to US$400 in a relatively short period, says South African market analyst Clive Roffey. He says the resistance levels of gold are at US$316 and $325.
"However, the US$325 mark is the most important. This is the level at which the gold hedgers will start to panic. Bullion above US$325 will signal a huge surge in price in a typical gold bull market. When gold moves into a bull market it does not wait for doubters and ditherers. It catapults," he says in his Roffey Report in the Smart Investor magazine. The gold price started rising in the third quarter of this year leaving some mines and hedge funds "bleeding profusely".
Ashanti, one of the leading gold producers had to negotiate with its counterparties when it lost about US$450 million on its hedge position. According to Flemming Martin Zimbabwe, demand for gold in the third quarter reached an all time high of 877 tonnes, 8 percent higher than the previous peak in the second quarter of this year. The strongest demand by region was in Pakistan which saw an increase of 102 percent between the third quarter of last year and the same period this year. In South East Asia demand went up by 70 percent in Korea and 64 percent in Japan In India, the world's largest consumer, it went up by 38 percent, while there was an increase of 30 percent in North Asia, which includes China, Hong Kong and Taiwan.
FMZ says factors which contributed to the increase in demand included the gold price relative to the local currency, for example, the yen had strengthened, seasonal and religious demands such as Diwali, Ramadan and the Chinese New Year, the improvement in oil prices which had now reached US$27 a barrel, as well as a good Indian harvest. The price of gold is now languishing around US$280 an ounce and may go down before it starts to rise. FMZ says the price has slumped following news that the Dutch central bank plans to sell 300 tonnes over the next five years. It says that although the sale is within the moratorium reached by the European central banks in September which limits them to selling 2 000 tonnes over the next five years, "sentiments clearly took a knock". It says the lower gold price should put a brake on supply and stimulate demand.
By Staff Writer
Copyright 1999 The Insider. Distributed via Africa News Online.
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