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

To: Ahda who wrote (78583)	10/17/2001 4:10:30 PM
From: Alex	Read Replies (1) \| Respond to of 116753

CSFB exit seen opening gold trade to producers Reuters, 10.17.01, 1:52 PM ET By Adrian Dascalu LONDON, Oct 17 (Reuters) - The departure of Credit Suisse First Boston (CSFB) <CSGZn.VX> from precious metal markets could open the way for gold producers to play a bigger role in the bullion trade, analysts said on Wednesday. "In the last twenty or thirty years, speculation in the derivatives market has had an undue influence on gold prices," said Ian Holzberger, managing director of Highlands Pacific Ltd <HIG.AX>. "This very well may be the start of giving some influence over prices back to producers," added Holzberger, whose company is developing the Kainantu gold mine in Papua New Guinea. Last week, investment bank CSFB announced the closure of its precious metals divisions in London, New York and Sydney. It also said it would no longer act as market-maker and would cease being one of the five banks which met twice daily in London to fix the benchmark price of gold. Ross Norman, analyst at TheBullionDesk.com, said CSFB's exit from the precious metals business might encourage producers to become more involved in their products' whole supply chain. "Producers may come to the fore and focus on vertical integration, which is moving down the value-added chain to producer, fabricator, refiner, to jeweller...as the platinum and oil industries have done," Norman said. "Maybe they will not put it immediately on the agenda, but it (CSFB's withdrawal) may indicate that there are opportunities at some point," he said. Other analysts also said that gold mining firms should have more say in the market and eventually influence gold prices -- Most producers say they are discouraged by present levels. Bullion closed in Europe on Wednesday at $281.90/282.60 an ounce, a price that includes a war premium -- the additional price investors have been willing to pay for gold as a safe haven during the U.S-led military campaign in Afghanistan. Gold was trading at some $271 before the September 11 attacks on the United States. Analysts calculate that eight of the world's top producers -- representing just under a third of annual output -- suggest their total production costs in the first eight months of 20001i were an average of $274 per ounce of gold. HARMONY SHOWS THE TREND An analyst based in Switzerland said Harmony <HARJ.J>, in South Africa, was among gold producers trying to get more involved in the bullion trade. "They have their own dealing room in Nice, France, they sell gold bars through the Internet, talk directly to jewellers, have their own refinery, so they are clearly moving towards the customers," he said. "We will see more of this, there is no doubt," he said. The number of gold market makers dropped to nine with the departure of CSFB, which was also credited with running one of the largest and most innovative gold derivates books. Kelvin Williams, marketing director for AngloGold Ltd <ANGJ.J> dismissed sugestions by some market players that producers might be interested in taking over the seat at the London fix left vacant by CSFB's departure. "In a sense a producer cannot, because in order to be part of that process you have to be a market maker...you have to be prepared to buy and to sell, and take credit risk in respect of your counter-parties," he said in Johannesburg. AngloGold is the world's largest producer with annual output exceeding seven million ounces. Analyst Keith Goode, of Eagle Mining Research, said he expected the London fix to continue smoothly without CSFB. At present four banks take part. "It's like putting your hand in a bucket of water, when you take it out it's like it was never there," he said. "I don't think that reducing the number of parties fixing gold will make a difference," Goode said. However, Williams said, CSFB's move had dealt a blow to producers and reduced liquidity in the market. "It is of concern to gold producers to lose a bullion bank of that quality, both for the purpose of liquidity in the forward market, but also because they were a counterparty that understood gold mine financing and had been a lender to the gold mining industry," Willams said. (Additional reporting by James Regan in Sydney and Darren Schuettler in Johannesburg) Copyright 2001, Reuters News Service.