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

To: Alex who wrote (19749)	9/25/1998 1:33:00 PM
From: Garry K.	Read Replies (3) \| Respond to of 116844

Friday, September 25, 1998 Analysts divided over soaring golds By IAN KARLEFF The Financial Post Gold stocks rallied yesterday as investors continued to flee to historically safe harbors. The Toronto Stock Exchange gold & precious minerals subindex soared 350.46 points, or 5.76%, to 6438.97, while the benchmark TSE 300 composite index fell 2%. "Obituaries for gold were definitely premature ... and finally our day has come," said John Ing at Maison Placements Inc. For the month, gold stocks making up only 6% of the total TSE 300 have rocketed 52%, while the composite is up only 6.6%. Market heavyweight Barrick Gold Corp. (ABX/TSE) rose $1.80 to $30.70 yesterday and Placer Dome Inc. (PDG/TSE) jumped $1.10 to $21.20. TVX Gold Inc. (TVX/TSE) climbed 24¢ to $3.54. The gold subindex usually follows the price of bullion. Gold soared US$6.20 to US$293.60 an ounce on the Comex division of the New York Mercantile Exchange yesterday, but is still up only 7.3% from its year-low of US$274.35, set August 28. Although the price of bullion has lagged the overall performance of gold stocks, gold bugs view this month as a positive sign for the re-emergence of the metal as a storehouse of value. Yesterday's rally was sparked by the perception that hedge funds would be forced into a situation of needing to cover their massive short positions principally the rumored 12 million ounces of gold shorted by financially precarious Long-Term Capital Management, said Ing. Other positive factors for a sustained gold rally, said Ing, include the lack of integrity in worldwide currencies, the "implosion of global liquidity" and the lack of faith in equity markets and the US$. He is expecting bullion to continue a rally to US$310 an ounce and to go as high as US$375 sometime in 1999. However, other analysts are not convinced the rally can be sustained Manford Mallory, of Research Capital Corp., says gold's rise is a play off the US$ and he is not expecting the currency to "crash and burn." "The way back up for gold will be slow, difficult and bouncy," he said. "There is too much gold supply, mine production still continues to increase at a healthy rate and demand is weak because of a downturn in Asia a big buyer of gold." Mallory has seen a large amount of big block trades this month, which suggests a move by institutions into the oversold sector. Overall, there has been somewhat of a group rotation into resources, and gold is benefitting more than the others, Mallory said. There is also the feeling among market participants that U.S. Federal Reserve chairman Alan Greenspan will move to lower interest rates. That would decrease the value of the US$ relative to other international currencies and give a bump to gold, said Judy Baker at Loewen, Ondaatje, McCutcheon Ltd. Baker is bearish on the overall market but points to recent hedge fund activity and instability in world liquidity as reasons for the recovery of gold and gold stock. "But it's important to remember that we are going into a deflationary period and gold typically does better in an inflationary environment," she said. "Typically, gold is a hedge against inflation." Although there appears to be contradictory arguments for the direction of gold, Baker said the 50% rise in the gold sector this month amid volatile equity markets could be a repeat of 1993 when gold started a four-year rally.