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

To: Don Green who wrote (22541)	11/3/1998 12:31:00 PM
From: Ron Schier	Read Replies (1) \| Respond to of 116972

Tuesday, November 3, 1998 Factors depressing gold prices seen reversing NEW YORK, Nov 3 (Reuters) -- The gold market has become increasingly tighter over the course of 1998, and the trends that have pushed gold prices lower are poised to reverse themselves, according to industry consultant CPM Group in New York. "Low investment demand, high levels of central bank sales, and persistent short selling by traders at banks, brokerage houses and commodity trading funds have all served to depress gold prices over the past year," said CPM Group managing director Jeffrey Christian at a briefing for analysts at the publication of the group's 1998 gold market survey. "All of these factors are expected to reverse field in late 1998 and 1999, paving the way for gold prices to move higher," he said. Investment demand for gold has been weak in recent years as competing assets in financial markets have offered better returns, Christian argued. "This has begun to change in the third and fourth quarters of 1998," Christian said. "The economic and financial crises in Asia and Russia, jittery equity and currency markets, and increasingly positive conditions in the gold market are likely to make gold a more attractive investment over the next couple of years," he said. "Already there are signs that this is true with investment demand picking up in North America, Europe, the Middle East and many Asian countries especially since August," he added. Official transactions are projected to fall with net sales of 16 million ounces (497 tonnes) seen in 1998, and are forecast to fall further to 14.0 million ounces (435 tonnes) in 1999, CPM Group said. "The period of high levels of central bank gold sales in the 1990's may be coming to an end," Christian said. On the supply side of the equation, mine production from market economies is forecast to rise by 1.2 percent to 64.9 million ounces in 1998 from 64.1 million ounces in 1997, and to rise by 2.2 percent in 1999 to 66.3 million ounces. Scrap supply will jump 47.7 pct in 1998 to 22.9 million ounces from 15.5 million ounces last year, due to the South Korean official gold collection campaign earlier this year. But scrap supply is seen falling 12.7 pct to 20.0 million ounces next year. Total mine and scrap supply, including output from emerging markets, is seen rising 11.1 pct to 101.8 million ounces in 1998 from 91.6 million last year, but a rise of only 0.5 pct to 102.3 million ounces is forecast for 1999. "The mining industry is suffering at present levels and cannot continue to produce gold at anywhere near recent levels if prices were to fall much further," Christian said. "The gold mining industry worldwide simply cannot function as it has were prices to fall below $280 an ounce for any significant period of time." Total fabrication demand, including industrial consumption and jewelry manufacture, is projected to rise 5.1 pct in 1998 to 106.1 million ounces, from 100.9 million in 1997, and is forecast to rise a further 2.3 pct in 1999 to 108.5 million ounces. India has been the largest gold consuming country since it edged out Italy in 1995. Indian gold use is seen rising 12.5 pct to 25.14 million ounces in 1998, following a 19.8 pct rise to 22.34 million ounces in 1997.