FOCUS-Asia in bearish mood towards gold
05:27 a.m. Feb 24, 1998 Eastern
By Kenneth Barry
HONG KONG, Feb 24 (Reuters) - Asian traders said on Tuesday they
saw continued downward pressure on gold during London's trading day
after a $4-an-ounce drop overnight.
The sharp decline in New York on Monday came mainly as a result of
easing tensions in the Middle East, but other, bearish factors continued to weigh on gold's price, they said.
Spot gold was quoted at US$293.00/50 an ounce in Hong Kong at 0730
GMT.
Two weeks ago gold was holding around US$298-301 an ounce, but there
was a lack of follow-through on the upside, which led to gold breaking
below US$296-297, traders said.
As the threat of war receded amid signs of conciliation between the United Nations and Iraq over weapons inspections, gold fell another four dollars.
''It is a listless market that appears to be drifting lower. If there
will be any movement, it will probably be on the downside,'' said Charles Perrignon, a bullion dealer at Macquarie Bank in Sydney.
Traders said they anticipated more selling during London's trading day.
'Dealers probably want to be short in this kind of environment. I think gold has a few more dollars to go on the downside,'' a trader in Singapore said.
Some physical demand was reappearing at these levels but gold was likely to slip further to US$290-288 before it stabilises.
The bearish factors that have weakened the market -- threat of central bank sales and weak physical demand -- remained, one trader said.
''I don't see the market recovering very quickly,'' he said.
Physical demand fell sharply in Hong Kong after Friday's move by the
People's Bank of China to cut the official price of gold in China, bringing it close to the international price.
''We went from very big physical demand to zip,'' a Hong Kong trader said.
The premium for gold over London spot prices in Hong Kong fell to 70
U.S. cents on Monday from 100 to 120 cents on Friday, he said.
The market was also focused on the prospect of more gold coming on to
the market as South Koreans sold jewellery for the local currency in a
nationwide campaign to raise foreign exchange to ease the country's debt problems.
Gold's trading range for the next several months was probably going to be between the recent low of US$277 and the recent high of $305, one trader said.
Another trader saw gold remaining under pressure this year.
''You will always get physical support on the way down, but I don't see anything else supporting gold,'' he said.
Gold could fall another $10 an ounce in the medium term, he said.
But the low prices also could result in changes in supply, which could help prices, traders said.
At current levels, the price of gold is below the costs of production for a significant portion of mines, they said.
''Supply will be disrupted if gold stays around this level. That will have supply implications in the medium to long term,'' Perrignon said.
-- Hong Kong News Room (852) 2847-8055; Fax (852) 2845-0636
REUTERS |
