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To: Alex who wrote (33828)	5/13/1999 6:09:00 PM
From: goldsnow	Respond to of 116764

EMERGING MARKETS-Gold drop hits S.Africa,few others 11:11 a.m. May 13, 1999 Eastern By Gill Tudor LONDON, May 13 (Reuters) - A fall in world gold prices towards 20-year lows is squeezing some developing economies hard, but few of them register on the radar screen for emerging market portfolio investors. Analysts say only South Africa, and perhaps Russia, offer such players much cause for concern despite a price drop of around $10 an ounce after Britain said last week it would sell off more than half its gold reserves. ''It's a significant kick,'' said Roger Chaplin, mining analyst at T. Hoare Canaccord in London. ''You've only got to do the arithmetic. If the $10 stayed off, that would cost $200 million a year in Africa, $80 million in Asia, about half that in Russia. These are big numbers.'' Gold was fixed at $278.40 a troy ounce in London on Thursday morning, just off Wednesday's eight-month low of $277.55. Some analysts shrug off this week's tumble as a minor extension of long-standing gold market weakness. But others say prices could test 20-year lows around $270, especially if other governments follow Britain's lead and shift more of their foreign reserves into currency holdings. Proposals to sell off International Monetary Fund (IMF) gold stocks to support debt relief for poor countries are also hanging over the market. South Africa heads the list of the world's biggest gold producers, which in the emerging market sphere also includes China, Indonesia, Russia, Peru, Uzbekistan and Ghana. ''South Africa is right in the firing line,'' said Paul McNamara, emerging markets economist at Julius Baer Investments. He said South Africa was hit by a ''triple whammy.'' Not only does gold account for some 20-25 percent of export earnings, but for a far larger share of reserves than in most countries. The gold industry also accounts for around eight percent of gross domestic product and remains a major source of jobs in a country wracked by unemployment, McNamara added. The rand is the only major emerging market currency to have taken a clear hit from the latest fall in gold prices, trading around 6.22 to the dollar on Thursday against 6.08 a week ago. The weakening prompted the central bank to hike repo rates on Thursday for the first time in nearly seven months. Mining shares have led down the South African stock market, which has fallen more than three percent in dollar terms in the past week on jitters over gold, Russia's political crisis and June general elections. But many investors remain upbeat on South Africa. ''So far this isn't a very big deal,'' said Geoffrey Dennis, global emerging equity market strategist at Deutsche Morgan Grenfell, which has just upgraded the country to neutral from underweight in its model emerging markets portfolio. Other gold producers on the emerging markets map will be less affected by low prices than South Africa because the metal plays a smaller role in their overall economies, analysts added. Oil, gas and metal exports account for some 70 percent of Russia's export earnings. But Russia produced only 127 tonnes of gold last year compared to South Africa's 474 tonnes, industry figures show, and oil prices are on the up. ''To be honest, the gold price is a long way down the list of Russia's problems,'' McNamara at Julius Baer said. But for poorer gold producers on or beyond the fringes of the emerging markets universe, such as Ghana, analysts say the latest gold price fall is more serious. Low gold prices cramp export earnings, deter mining investment and cost jobs. The World Gold Council, which represents producers, says selling IMF gold stocks could knock prices further and hurt the very countries it is trying to help through debt relief. ''It's already causing damage,'' T. Hoare's Chaplin said. ''People are only looking at the much better projects, and cutting costs wherever they can.'' Copyright 1999 Reuters Limited.

To: Alex who wrote (33828)	5/15/1999 7:14:00 PM
From: goldsnow	Respond to of 116764

Interest-Rate Jitters Worry Wall Street 05:54 a.m. May 15, 1999 Eastern By Pierre Belec NEW YORK (Reuters) - It's always something. First Wall Street worried about the global economy, then it was corporate earnings and high stock prices. Now, the nail-biting is over interest rates. The experts say: ''Don't worry.'' Stock investors played their latest hunch about the direction of interest rates this week and they concluded that inflation may force up the cost of borrowing for everything from houses to cars. A rise in interest rates would not be a crowd pleaser. Wall Street has learned that Great Bull Markets just don't fade way. They are slaughtered by rising interest rates, which can have a strangling effect on the economy's growth and on corporate profits. Federal Reserve Alan Greenspan again had a hand in stoking the latest inflation fears. The Fed chief, who has had problems explaining why the economy has grown strongly for nine years without a hint of inflation, warned recently that the low jobless rate would fuel inflationary pressures. Many investors took this to mean that the next move in U.S. interest rates would be up. For that reason, all eyes will be on next Tuesday's meeting of the central bank's policy-setting Federal Open Market Committee, which will look at the interest-rate story. Greenspan's warning had its usual impact on the inflation-sensitive bond market with the yield surging to the highest level in more than a year. The key 30-year Treasury bond's yield climbed to 5.90 percent, flirting with the dangerously high 6.00 percent level. Less than two weeks ago, it was only 5.66 percent. But the experts are scratching their heads, wondering where is the inflation? ''Fed chief Alan Greenspan repeated his favorite warning about 'tight labor' markets causing inflation,'' said Richard Salsman, senior economist for the Boston-based consulting firm H.C. Wainwright & Co. ''That tale, devoid of the expected ending, has been told for many years now, but it's a tall tale, at odds with facts.'' Inflation typically creeps into the economy when too much money chases too few goods. But the economy is still growing and there is still plenty of capacity to avoid shortages of goods that chase up prices. Salsman said Wall Street has the wrong perception that fundamentals are changing. ''What we are seeing is the end of the deflation period and this does not signal the return of inflation,'' he said. ''Commodity prices have just simply stopped falling.'' The slide in commodity prices is leveling off because of a rebound in recession-hit economies of Asia and Latin America. Meanwhile, the evidence mounts that inflation is not making a major comeback. The experts said there may be increases in inflation in the coming months as the leap in crude oil prices, or special cases, filter through the economy. But the increases will be just blips. Overall, there will be no scary deterioration in the big picture, they said. The U.S. economy created more jobs and workers' wages increased at the slowest pace on record in the first three months of this year. The Producer Price Index for April was flat, while the Consumer Price Index posted a rise of 0.7 percent last month after a 0.2 percent gain in March, with oil prices contributing to the jump. Salsman noted that gold -- the best inflation indicator -- is not flashing any warnings. ''The highest correlation of inflation has shown up in gold, with a lead time of nine to 12 months,'' he said. ''With gold selling at a 20-year low of less than $280 an ounce, it shows there's no inflation threat.'' infoseek.go.com