POG $331. now. Something from another thread although don't know where it originated.
From the Crystallex thread
To: virginijus poshkus (1310 )
From: virginijus poshkus
Jul 2 1997 2:41PM EST
Reply #1317 of 1323
To all. read below.
Analysts: Gold Market Braces for Further
Falls
Wed, 2 Jul 1997
LONDON- The price of gold fell to its lowest level since March 24, 1993
Wednesday
and shows all signs of falling even further, according to bullion market dealers and
analysts.
Even the most optimistic lights were barely visible through the gathering gloom.
``The best hope is that there is no hope which means the price will probably not fall in
a straight
line,'' said precious metals markets analyst Andy Smith at Union Bank of Switzerland
(UBS).
He expected the fall to at least slow ahead of the July 4 U.S. Independence Day
holiday.
At its official morning fixing in London, bullion was set at $331.45 per ounce down
from an already
teetering $333.70 on Tuesday and taking it perilously close to its next major support
level at
$330.00
``A break there would be very significant as more psychologically induced selling
would be seen if
the $330 goes,'' an analyst at another major European bullion trading bank said.
The last time gold was in this area -- March 1993 when its low was $326.10 --it was
its lowest
price for seven years.
The auguries suggest that price will be under examination pretty soon. ``There is
everything to go
for on the downside,' said market analyst Ted Arnold at Merrill Lynch.
``The (investment) funds realise there has to be a new fundamentally based equilibrium
in gold,'' he
added.
According to Arnold, that would mean up to 300 tonnes of gold mining capacity being
shut down
due to low profitability.
``But the miners will not roll over and die easily. We are in for a long, bitter time,'' he
said.
The mining companies are already doing what they can to safeguard their profitability
and that is not
helping the price, according to market analysts.
They note that the gold lease rate -- the cost to the bullion banks of borrowing gold --
has almost
doubled in the past two weeks indicating the level of borrowing has increased.
That can happen for several reasons but one of the most likely is when producers
borrow gold,
which they have not yet mined, to sell in order to avoid lower prices in the future.
The higher cost producers in Australia have been active sellers this week and that has
damped an
already soggy price, analysts said.
``The Australians are concerned about a further interest rate cut at home and are trying
to take
advantage of the domestic currency moving in their favor,'' an analyst said.
Another reason for high lease rates is borrowing by speculators selling ``short'' --
selling gold they
do not own in the belief that the price will fall far enough for them to cover their
liabilities in the
future.
It was the investment funds' positioning to take advantage of prices falling further that
had broken
the gold price out of its previous price range between $335-$340, market analysts
said.
Some dealers said a European central bank -- Belgium was the favorite - had been
selling gold
from its reserves which also explained the staggering price but others were less sure.
``It is more likely to be a bullion bank selling possibly as a result of additional lending
(to the
market) by a central bank,'' a market analyst said.
Meanwhile physical demand has slumped despite the apparent attractiveness of cheap
prices which
could be connected to the markets in Hong Kong being closed so far this week for the
territory's
hand over to Chinese rule.
``We are waiting to see if there is a reaction on the re-entry of Hong Kong,'' a dealer
said. Hong
Kong is one of the key gold entrepot points for China.
UBS's Smith said it was crucial that the gold price held above its 1993 lows. He noted
that since
1982 each time the gold price collapsed it was rescued by a factor outside the market.
In 1982 there was the Mexican debt crisis, in 1984 the collapse of Continental Illinois
Bank, in
1995 the dollar slumped after the G7 ``Plaza'' accord and in 1993 the well publicised
entry of
finaciers George Soros and James Goldsmith to the market sparked a rally to over
$400 in five
months.
``Each time it has needed a catalyst to get it back up. It is difficult to see where that will
come from
this time,'' he said. |
