PR Wire: Challenging times ahead for gold
This is a media release carried by PR Wire Australia a service of AAP
Source:ABARE / OUTLOOK
OUTLOOK 2000
1 March 2000
Challenging times ahead for gold
Australia's gold miners can look forward to higher prices in 2000, according to a recent market assessment by ABARE. 'Growing demand for gold jewellery and constraints on gold supply from the official sector are expected to result in the average gold price firming in 2000, to average US$300 an ounce', Mr Michael Evans, Senior Research Officer, ABARE, said at the OUTLOOK 2000 conference in Canberra today.
Although positive about the outlook for gold in 2000, ABARE was less optimistic regarding the metal's medium term prospects. Mr Evans warned delegates that, 'over the medium term ABARE expects gold prices to return to their steadily declining longer term trend, in real terms, as supplies from new lower cost mines and the official sector readily meet growth in demand'.
On future Australian production, Mr. Evans said that, 'despite lower gold prices and sharply reduced exploration spending, only a modest decline in production is projected, mainly because of support from hedging and continuing improvements in gold mining productivity'.
Mr. Malcomb Southwood, Senior Gold Analyst, JB Were Limited, broadly agreed with ABARE's positive outlook for the gold market over the shorter term. Mr. Southwood expected that over the next 18 months gold would trade between US$275-320 an ounce, as, 'the supply from hedging and central bank selling should be absorbed reasonably comfortably'.
Mr. Southwood explained that with effective restrictions covering a large proportion of central bank reserves over the medium term, 'global net central bank sales are unlikely to exceed 600 tonnes a year'. Recent price rises and subsequent closures of hedge books by large mining companies were seen by Mr. Southwood as indicating that, 'hedging is likely to contribute less to the supply side for the foreseeable future'.
Looking at the demand outlook in Asia, Mr. Kamal Naqvi, Metals Analyst with Macquarie Research, predicted that, 'Asia will continue to be a source of positive gold demand growth over the medium term, but particularly over the next couple of years'. Mr Naqvi suggested that South East Asia is likely to account for most demand growth in Asia, with demand in China and Japan to remain steady; in' India declining slightly. Over the longer term, Mr Naqvi speculated that 'westernisation' of consumption tastes in Asia, coupled with growing alternative investment opportunities, is likely to reduce demand for the precious metal unless the metal is more effectively promoted.
Providing a miner's perspective on gold issues at the conference was Mr Peter Lester, Managing Director of Newcrest Mining, who told to the audience in Canberra that, 'the world gold industry is undeniably facing a watershed'. Mr Lester said that increasing globalisation of world equity markets and growth in the non-resources sectors has meant that gold companies now face significant pressure to increase returns on their shareholders invested funds in order to attract investment. Mr Lester considered that such pressure was likely to lead to further consolidation of the gold sector globally and within Australia, with an increasing number of large, lower grade projects with higher capital commitments being undertaken by larger companies.
Speakers at the Gold session were:
Mr Michael Evans, Senior Research Officer, ABARE Mr Peter Lester, Executive General Manager, Corporate Development, Newcrest Mining Limited. Mr Kamal Naqvi, Metals Analyst, Macquarie Equities Limited. Mr Malcomb South wood, Commodity Analyst (London) and Partner, JB Were & Son.
For further information contact:
During the conference, Margaret Day, OUTLOOK Media Centre on (02) 6257 5243.' After the conference, Mr Chris Allen, ABARE on (02) 6272 2252; e-mail CAllenabare.gov.au
AAP NH
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