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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: lorne who wrote (48320)	2/7/2000 10:42:00 AM
From: Alex	Respond to of 116958

FOCUS-Gold price surges on rumour smorgasbord By Marie McInerney ADELAIDE, Feb 7 (Reuters) - The world gold price surged to a three month high in Asian trade on Monday but analysts said the sudden strength went beyond the announcement by Canadian giant Placer Dome Inc (Toronto:PDG.TO - news) that it was suspending its hedging programme. ``Everyone is trying to second-guess what is driving it, as it is not just Placer Dome,' said gold analyst Keith Goode of Bell Securities as an intrigued market buzzed with rumours. In Asian trading on Monday, the gold price surged to $318 an ounce, the highest level since October 14, 1999, from Friday's spot New York close of $301.80/302.6, despite much of the market being closed for the Chinese New Year break. Analysts said gold began to rise ahead of Placer's news, triggered by concern about the long bond exposure of some U.S banks and the increasing likelihood of inflation in the U.S following the drop in the unemployment rate to four percent. The market also speculated that troubled Ghanaian mining group Ashanti Goldfields Co Ltd was seeking to reduce its hedge position, despite last week securing a further rollover until February 17 to pay up for derivative contracts. As well, both a leading U.S. investment bank and a German bank were rumoured to be reducing short positions, analysts said. ``Plenty of people are still short the metal, but there seems to be some different factors associated with the rally this time and a feeling it may continue,' said CIBC Eyres Reed equities dealer Martin Angel. Talk was also strong that Barrick Gold Corp (Toronto:ABX.TO - news), the second largest North American gold miner, would line up with Placer and announce the suspension of its forward sales when the U.S market opened on Monday. PRODUCERS MAY STOP HEDGING ``All gold producers will stop (hedging) if gold looks like it is going up, they just can't afford to lose money on a hedge,' said mining analyst John Macdonald from CIBC World Markets. ``But if we've got real problems, that the bullion banks are starting to buy back or there's some big news to come out of that (long bond) situation, that will drive it higher,' he said. ``There are a number of factors, none of which in isolation seems to have been able to move gold in the past, but they've all been contributors here,' Macdonald told Reuters. Placer Dome said it was suspending its hedging programme in expectation of an improving gold market, and it called on other producers to rethink their policies. Hedging allows a company to guard against a fall in gold prices by selling future production at a fixed price. It can pay well when confidence in gold is declining, but can backfire when prices rise. Ashanti was pushed close to default last year in a financial crisis precipitated by huge gold derivative losses. However, a number of analysts regarded Placer's announcement as a side issue. ``Their forward sales position today is one month less than what it was at the end of last year,' Goode said. "I think people jumped on the basis that it was a close-out." IS THERE A BIG SHORT? "The whole issue at the end of all this is, 'is there someone majorly short and in trouble' and if there is that situation, then the gold price is going to go up," he said. ``It could just as easily collapse tonight, it could just as easily go up another US$20 tonight,' he said. An industry source, who did not want to be named, said the market would welcome the suspension of hedging, which was seen as an overhang, but that Placer's announcement was not in itself significant. ``It is important a North American has said it, but its impact in actual ounces in pretty benign,' he said. The Australian Gold Council, which represents producers, agreed with analysts that Placer Dome's suspension of its gold hedging programme was just the spark. ``The events of the past 48 hours demonstrate that a range of factors have come into play now,' chief executive officer Greg Barns said. Central bank agreements on sales and lending, speculators getting out of the market and U.S. inflation fears also contributed, he said. He would not comment on individual companies' hedging strategies. biz.yahoo.com