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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: ItsAllCyclical who wrote (32208)	9/3/2003 8:28:06 PM
From: AltLar	Read Replies (1) \| Respond to of 36161

World Bank sees gold price falling, nickel strong Wed September 3, 2003 01:02 PM ET WASHINGTON, Sept 3 (Reuters) - The World Bank forecast on Wednesday the gold price, trading around $370 an ounce, should fall below $300 an ounce as new, low-cost mines are started and producers slow the rate they've been buying gold back to unwind price protection contracts. Gold stormed from around $250 an ounce lows last year, reaching a 6-1/2 year high at $388.50 in February as the U.S. dollar fell and threats of war against Iraq grew. But the bank said gold's rise should weaken over the medium-term. "Over the medium-term prices are expected to fall below $300 an ounce as supplies from all sources exceed demand," the World Bank said in a Global Economic Prospects report. "Even below $300/oz, mine production is expected to continue to increase moderately as new low-cost operations come on stream," it said. The World Bank also said key for the gold price was whether central bankers renegotiate a 1999 European Central Bank Gold Sales Agreement to limit their gold sales. The agreement, which restricts some central banks to selling only 400 tons of gold per year, expires a year from now. Market participants have speculated it will be renegotiated at next month's International Monetary Fund-World Bank annual meetings in Dubai. The bank said gold companies had been unwinding their gold hedging programs, cutting hedge books by 4.5 million ounces in the first quarter this year. "It is expected that producer dehedging will slow in the second half of this year and in 2004, and remove much of the support under gold prices," it said Major gold producers have been buying back gold and cutting their hedging programs since the price stirred from $250 an ounce. Smaller hedge books give producers bigger exposure to a rising gold price. The World Bank was more optimistic about the nickel price, saying it should jump significantly over the next couple of years with no new projects on the horizon until about 2006. The metal hit a 3-year high of $9,950 a tonne on Tuesday but was down at $9,880 on the London Metal Exchange on Wednesday. The price has risen about 75 percent since October 2001 because of low stocks, strong demand from the stainless steel industry -- the biggest user of nickel -- and tight supplies. "The nickel market is expected to slip into deficit this year and remain so in 2004 and 2005, mainly because of a dearth of major new projects to come on stream over this period," it said. On copper, the bank said demand outside China and neighboring Asian countries was weak and the market could remain in surplus for the rest of the year but slip into a deficit in 2004 as demand picks up. However, stronger copper prices depended on the extent of a global economic recovery and production cuts in Latin America and the United States, it said. "The restart of idled capacity in Chile and the U.S. could prevent prices from moving sharply higher," it cautioned. Copper has cleared the key $1,800 a tonne level and was last at $1,814 a tonne in London, The bank forecast the aluminum market would move into deficit in 2005 but warned of a number of uncertainties in the near term such as the extent of demand growth, start-ups of idled capacity and the size of Chinese net exports. reuters.com