''About half the world's gold mines are now unprofitable on a cash
operating basis at prices below $285, meaning mine supply will be start to be curtailed, while demand is rising in 1997 and we have revised our forecasts up for 1998,'' said Jeffrey Christian, managing director of gold industry consultant CPM Group.
Gold hits 18-year low, oil weak, coffee soars
05:45 p.m Dec 09, 1997 Eastern
NEW YORK (Reuters) - Gold slid to 18-year lows Tuesday as ready lending
of gold by central banks and forward sales by mining companies weighed
on prices.
In other markets, weak gasoline prices led oil markets lower on
expectations of rising supplies, and coffee prices jumped higher after a
top Colombian coffee official said that dryness from the El Nino weather
pattern had reduced output.
At the COMEX in New York, gold for February delivery closed $5.10 lower
at $284.90 an ounce, after setting a new life-of-contract low at
$283.30.
In the bullion market, spot gold ended at $282.75 an ounce compared with
the Tuesday afternoon fix in London at $283.25 an ounce, the lowest gold
fix since August 1979.
The U.S. dollar strengthened on Tuesday, making dollar-denominated
bullion more expensive and weakening demand even more at a time when
supplies of gold remain ready to industrial users, jewelry makers or
investors.
''There's been more hedging by Australian gold miners this week, as the
Australian dollar has slid lower, and there was good bullion bank
selling in the gold market this morning probably as a result,'' said
Carlos Perez-Santalla, a Hudson River Futures COMEX floor trader.
Some analysts said the prolonged weakness in gold now meant that a
growing number of mines would have to curtail production since returns
would not meet costs.
''About half the world's gold mines are now unprofitable on a cash
operating basis at prices below $285, meaning mine supply will be start
to be curtailed, while demand is rising in 1997 and we have revised our
forecasts up for 1998,'' said Jeffrey Christian, managing director of
gold industry consultant CPM Group.
The lower gold price claimed another victim Tuesday as the Paddington
mine in Western Australia announced it would have its operating life cut
to 18 months by owner Goldfields Kalgoorlie, which cited lower forward
prices for gold.
Silver continued to shrug off the weakness in gold, with March silver at
COMEX ending up 5.3 cents at $5.448 an ounce.
COMEX silver warehouse stocks slid to a new 12-year low Monday, falling
another 300,000 ounces to 124,699,013 ounces and reflecting falling
world silver inventories.
At the New York Mercantile Exchange, gasoline prices fell and led other
petroleum prices down as traders pointed to expectations that stocks of
gasoline in the United States were rising and to a weak tone to the cash
market along the U.S. Gulf Coast, a major refining center.
January gasoline ended 0.99 cent a gallon lower at 55.97 cents. January
crude ended 17 cents lower at $18.67 a barrel and January heating oil
0.40 cent a gallon lower at 53.12 cents.
''Cash prices just sank today and most are expecting gasoline stocks to
have headed higher. But volume wasn't great and we remain in the $18.50
to $19.00 range,'' said Warren Tashnek, president of Fimat USA Futures
Inc in Houston.
Traders were expecting a build-up in gasoline stocks of up to 2 million
barrels for the week ended December 5 in weekly inventory data on U.S.
refineries to be released Tuesday evening by the American Petroleum
Institute. After the close of trading, the institute reported a decline
of 1.64 million barrels.
At the Coffee Sugar and Cocoa Exchange, coffee prices rose sharply as
speculators jumped into the market on news of a reduced crop in
second-largest producer Colombia due to the global weather phenomenon El
Nino.
Coffee for March delivery rose 8.85 cents a pound, or about 5 percent,
to 183.20 cents, its highest finish since May 29.
Jorge Cardenas, general manager of the National Coffee Growers'
Federation and Colombia's top coffee official, said on Tuesday that El
Nino -- a warming of sea waters off South America that plays havoc with
the global climate -- had caused the loss of about 500,000 132-pound
bags of coffee since July.
Cardenas said production during the 1997 calendar year -- earlier
forecast to total up to 12.5 million bags -- would now come in at no
more than about 11.5 million to 12 million bags.
''The Colombians scaled back their crop expectations and people are
looking at the next U.S. stocks figure and expecting a decline,'' said
Prudential Securities analyst Arthur Stevenson. ''Those are the two
factors behind the move.''
A monthly report on U.S. coffee stocks by the Green Coffee Association
of America U.S. stock report was due next Monday.
Analysts said the report was likely to show a drawdown in U.S. consumer
coffee stocks during November of some 300,000 bags.
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