Here one with 500 tons.
By PAUL BAGNELL
Mining Reporter The Financial Post
The price of gold sagged to a 19-year low yesterday as investors continued their flight to the US$.
The spot price of gold closed at US$276.70 an ounce in New York, down US$5.50 from Wednesday and the lowest price since June 28, 1979.
Analysts blamed bullion's woes on the strong US$ and investors' belief the currency is now the only safe place to park their funds.
Yesterday's massive selloff in world equity markets was part of the same phenomenon, they said.
Gold prices have been in a steady decline since early 1996, when they reached a five-year high of US$415.50 an ounce. The collapse has wiped out profits for most producers, pushed several mining companies toward insolvency and decimated the junior exploration sector.
"Money is fleeing the stock markets, the currency markets and the bond markets and going, not to gold, but to the US$," said John Ing, president of Maison Placements Inc. in Toronto. "The US$, for the past 12 months, has been the haven of choice."
But he said the stampede toward the US$ is "misguided" and predicted the currency is headed for a fall.
The U.S. economy's US$300-billion trade deficit will undermine the US$ sooner rather than later, he predicted. "History shows you can't run those deficits without having something go, and that's going to be the currency." A sliding US$ would push gold prices up, he said.
Economist Martin Murenbeeld, of M. Murenbeeld & Assoc. in Victoria, also said low gold prices are directly linked to the strong US$. "Gold is the second-best asset in the world today, but the US$ is the first," he said.
Rumors that Russia is selling some of its about 500 tonnes of gold may also be hurting prices, Murenbeeld said. He suggested a lowering of interest rates by the U.S. Federal Reserve, which he expects before long, will likely stem the decline.
The share prices of gold producers took a pounding on the Toronto Stock Exchange yesterday, with the TSE's gold and precious minerals subindex plunging 308.79 points, or 6.17%, to 4695.21.
Ing said the stocks of some gold companies are sharply undervalued, naming Prime Resources Group Inc. of Vancouver as an example. "They've got cash, low costs -- all the ingredients," he said.
|
