Gold Price Surges for 2nd Day on Expectations Producers Will Resist Sales
By Claudia Carpenter
Gold Rises Above $300/Ounce as Producers Seen Buying (Update3)
(Changes dateline, adds quotes in 2nd, and 3rd paragraphs,
updates prices.)
New York, Sept. 28 (Bloomberg) -- Gold rose 8 percent,
climbing above $300 an ounce for the first time in almost a year,
as mining companies and speculators bought the metal anticipating
that a restriction on sales by central banks will send prices
still higher.
Prices have surged almost 14 percent in the past two days
after European central banks said they would limit sales and
lending of their gold reserves for five years. Gold is still down
a third since early 1996 after some central banks sold their
bullion in favor of interest-paying government bonds.
``The price of gold has lost its ceiling,' said Carlos
Perez-Santalla, a gold trader at Hudson River Futures in New
York. ``With the European central banks holding back on gold
sales, producers are not going to sell anything either.'
Gold for December delivery rose as much as $22.70, or
8 percent, to $306.50 an ounce on the Comex division of the New
York Mercantile Exchange, the first rise above $300 an ounce
since last October and the highest price since Oct. 8.
``We've bought some gold today,' said Nick Holland,
finance director at Gold Fields Ltd. in South Africa, the world's
second-biggest gold producer. Gold Fields bought ``to square off
some positions,' Holland said. Last week, the mining company
bought 100,000 ounces of gold, which was 12 percent of an auction
held by the Bank of England.
In London, gold for immediate delivery rose as much as
$25.43, or 9.1 percent, to $305.48 an ounce, the highest price
since May 1998.
Mining company shares in the U.S., Africa and Australia
followed bullion higher for a second day. The Philadelphia Stock
Exchange Gold and Silver Index rose as much 4.97, or 5.7 percent,
to 91.49, led by Battle Mountain Gold Co., up 10.7 percent.
On the Johannesburg Stock Exchange, AngloGold Ltd. the
world's biggest producer, rose as much as 52 rand, or 14 percent
to a record 423 rand, while Normandy Mining Ltd., Australia's
biggest producer, gained 9 Australian cents, or 6.9 percent, to
A$1.40.
The Australian Gold Index comprising 14 of the nation's
largest producers reached a 10-month high, while the Johannesburg
All-Gold Index advanced to its highest level in 19 months.
Supply and Demand
The European banks, which include the Bank of England and
the Swiss National Bank, said they will restrict gold sales to
400 tons a year for the next five years. While that amount is
more than the 315 tons sold on average during the past decade, it
removed concern that even greater amounts would be sold, analysts
said.
With central bank sales under control, the balance of supply
and demand appears favorable, analysts said. In the second
quarter, world gold demand was a record 809.5 metric tons, up
16 percent from a year earlier, led by a surge in sales in the
U.S., Japan and South Korea, according to the producer-funded
World Gold Council.
``We need a reaction in the gold price to encourage mine
supply to meet demand,' said John Bugg, an analyst at Macquarie
Investment Management Ltd., which oversees $2.9 billion.
Separately, Bank of Japan officials said Japan has no
intention of selling gold now, though they declined to comment on
what they may do in the future.
Accelerating the price rise today was buying by traders who
had sold gold they didn't own in a bad bet that prices would
fall, analysts said. As of Sept. 21, speculators had sold 65,077
gold futures, each equal to 100 ounces, on the New York
Mercantile Exchange, 2.4 times the number of contracts they had
bought, according to the Commodity Futures Trading Commission.
``Many people are buying because they have to buy' said
Paul Lee, head of gold trading at Dresdner Kleinwort Benson in
Sydney.
Gold's gain dragged other precious metals higher.
Silver for December delivery rose as much as 31.5 cents, or
5.9 percent, to $5.67 an ounce on the Comex. October platinum
rose as much as $20.80, or 5.5 percent, to $401.40 an ounce on
the New York Mercantile Exchange.
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