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

To: Gabriela Neri who wrote (16541)	8/25/1998 2:29:00 PM
From: Alex	Read Replies (1) \| Respond to of 116762

Gold beckons amid turmoil The recent devaluation of the Vietnamese and Russian currencies has shown that the Asian currency crisis is rolling on and continuing to have ripple effects on the emerging markets. The world is in danger of a currency meltdown, stemming in particular from the beleaguered positions of the Japanese yen and the Chinese yuan. The downward pressure on the yen persists side by side with evidence that the deflationary forces in the economy are gathering pace. There are grave doubts about the latest fiscal package announced by the authorities being any more successful than previous stimulatory packages. Increasingly, it seems a further reduction in interest rates is necessary, which will weaken the yen more. Any significant fall in the value of the yen will have a serious effect on the competitiveness of other Asian economies and particularly China though the problems confronting the Chinese economy are such that a devaluation of the Chinese yuan could be inevitable, irrespective of whether the Japanese yen falls further or not. A devaluation would affect the Hong Kong dollar peg and would exert downward pressures on other currencies in Asia. The rouble devaluation will have serious consequences both for Russia and emerging markets. It could easily precipitate a banking crisis in Russia, and create serious inflationary pressures and political instability. It could also spark a chain reaction among currencies in eastern and central Europe and add to pressures on the yuan. The flight of capital out of Asian economies, which is partly stimulated by the fear of further currency weakness, could be accompanied by gold purchases by Asian investors. Moreover, further falls in Asian currencies and elsewhere will probably be followed by easier monetary policies in the United States and possibly other industrial countries as well. Such reflation of the world economy should also benefit gold. South African gold shares offer investors an excellent hedge against potential further weakness in the rand exchange rate stemming from further currency instability in the outside world at a time when gold mining profits are already soaring and yet gold shares remain depressed. All Material c copyright Independent Newspapers 1998.