9th July 1997
Gold slide not over yet, experts warn
By PAUL BAGNELL
Mining Reporter The Financial Post
Investors should expect further declines in the price of gold, experts warned yesterday, after a three-day free fall was halted by a modest rally.
Gold climbed by US$2.10 in New York, to close at US$320.20 an ounce, while the share prices of several gold producers also staged a modest rebound. The Toronto Stock Exchange's gold and precious minerals subindex rose 168.19 points, or 2.23%, closing at 7698.08. The move helped repair some of the damage caused by a three-day slide that sent the TSE gold index tumbling 9.97%, wiping out about $3.54 billion in market capitalization. Yesterday's rally restored about $738 million of that.
But most experts said the negatives in gold's short-term future outweigh the positives.
Yesterday's increase in the gold price was driven mainly by short-sellers covering their positions and taking profits, gold
traders said.
Most observers believe the dramatic collapse in the gold price,which began last Thursday, was largely driven by short-sellers, who typically borrow gold and hope the bullion price later falls. If it does, they can buy gold at the lower price, repay what they owe and keep the difference.
On Thursday, speculators pounced on news the central bank of Australia had sold 167 tonnes of gold over the past six months.
Jeff Ralph, a gold trader at Royal Bank of Canada in Toronto, believes some U.S. and European mutual funds have taken large short positions in gold, and haven't yet covered. "I think they are all looking for the US$300 level," Ralph said, predicting the gold price will continue
to wither.
John Ing, president of Maison Placements Inc. in Toronto, also believes gold will face continued downward pressure.
Victor Flores, a Texas-based analyst with Marleau Lemire Inc. of Montreal, was another of those foreseeing a dreary summer for gold. "It's hard to imagine strong support coming for the metal from any quarter at this point," said Flores.
Martin Murenbeeld, a gold analyst in Victoria, was slightly more optimistic. He said the gold price has fallen as far as warranted by current market conditions.
Meanwhile, the share prices of Canada's two big gold producers rose yesterday. Investors snapped up shares of Barrick Gold Corp. and Placer Dome Inc., both of which hit 52-week lows on Monday. Barrick (ABX/TSE) jumped $1.65 a share to close at $29.45 after almost 2.8 million shares traded.
Placer Dome's stock (PDG/TSE) was also heavily traded and climbed 85› to close at $20.10 on volume of about 3.1 million shares. Analyst Leanne Baker at Salomon Brothers Inc. in New York revised her rating on Barrick to "buy" from "hold."
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