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

To: Bobby Yellin who wrote (11638)	5/14/1998 9:05:00 PM
From: goldsnow	Respond to of 116836

FOCUS - Gold supply highest ever in 1997 09:58 a.m. May 14, 1998 Eastern By Marius Bosch LONDON, May 14 (Reuters) - World gold supply reached its highest level in 1997 at 4,254 tonnes while the bullion market saw the most dramatic price fluctuations in a decade, Gold Fields Mineral Services (GFMS) said on Thursday. GFMS said in its annual Gold 1998 report that gold supply was boosted by increased supply from the official sector, mainly central banks, producer hedging and short selling by investment funds. Mine production increased to 2,464 tonnes from 2,357 tonnes while official sector sales increased to 406 tonnes from 275 tonnes. Central bank sales were one of the main reasons for gold's plunge from around $415.00 an ounce in February to just under $300.00 at the end of December. Three countries, Australia, Argentina and Belgium accounted for much of the selling. The average London afternoon fix was $331.29 last year -- a 12-year low and in real terms the lowest level since 1972. ''We have seen the most dramatic prices in a decade last year,'' GFMS chief executive Stewart Murray said at the presentation of the report. Murray said a key factor in the gold market during 1997 was mobilisation of official gold reserves, adding that it was too early to call an end to the mobilisation of official gold reserves. Mobilisation usually involved reserves being moved to or between one or more of the world's principal trading centres. ''It is too early to call an end to the mobilisation of official bullion reserves, whether these are disposed of as direct sales or borrowed by intermediaries to appear in the form of producer hedging or speculative short selling.'' But he said that the outlook for 1998 was better than the previous year. ''Overall, however, it does seem unlikely that the gold market this year will have to absorb the massive wave of liquidity that nearly drowned it in 1997,'' Murray said. Murray said part of the reason for the decline in the gold price was the strength in the U.S. dollar particularly against some Asian currencies. Demand in South East Asia tailed off considerably as a result of the region's economic turmoil but this was offset by increased demand in the Middle East and India. The report said fabrication demand for gold increased by 17 percent to 3,890 tonnes. ''Jewellery completely dominates world gold fabrication and in 1997 its lead was further extended,'' the report said. Indian offtake increased by 41 percent to just under 600 tonnes while fabrication demand in the Middle East increased by 31 percent. Murray said mine production increased in virtually every region of the world with global gold mine supply reaching a new record level of 2,464 tonnes -- an increase of five percent on the previous year. South Africa remained the largest gold producer with 489.2 tonnes of gold last year, compared to the 494.6 the previous year. The United States was the next biggest producer with 351.4 tonnes from 329.3 in 1996, followed by Australia with 311.4 tonnes against 1996's 289.5 tonnes and Canada produced 168.5 tonnes. Murray said South Africa's ageing high-cost industry was overtaken for the first time since 1905 by the combined North American production of 519.9 tonnes. The report put the average cash cost of gold production at $250 an ounce -- a seven percent decrease and with the most substantial savings achieved by Australian and U.S. producers. ''Total costs were down $12 an ounce, or four percent. Around 42 percent of Western World producers had total costs above the average spot price for the year of $331.29,'' the report said. ((London newsroom +44 171 542 8065. Fax +44 171 542 8077. london.commodities.desk+reuters.com)) Copyright 1998 Reuters Limited.