[A-List] Gold strikes back

[Sabri Oncu <soncu@xxxxxxxxxxx>]

May 31:  Gold Prices At 4-Year High As Investors Shy Away From
Stocks
Location: New York
Author: RiskCenter Staff
Date: Friday, May 31, 2002

Gold prices have risen to a 4 1/2 year high, gaining for the
ninth time in 10 sessions on increased demand from investors
seeking an alternative to stocks.

Gold has soared 17 percent this year, compared with a 7 percent
drop in the Standard & Poor's 500 stock index. Investors are
turning to gold for the first time in years, seeking better
returns and protection from any disruption to financial markets
because of tensions in the Middle East and Asia, traders said.

"Today we're seeing another wave of fund buying," said Peter
Merritt, head of precious metals trading at HSBC Holdings Plc in
New York. "Investment funds are sitting on lots of cash."

Gold for August delivery rose $1.30, or 0.4 percent, to $326.80
an ounce on the Comex division of the New York Mercantile
Exchange, the highest closing price for gold since October 1997.
Prices were up 19 percent from this time last year.

Increased tensions between India and Pakistan, both nuclear
powers, and the unresolved conflict between Israel and the
Palestinians have led some investors to buy gold as a haven,
traders said.

Also contributing to increased demand for gold is a weakening of
the dollar, which makes the dollar priced metal cheaper for
buyers using other currencies. The dollar fell to a 14 month low
against the euro today and also slipped against the Japanese yen.

"The weaker dollar has been helping gold all along," said
Merritt, who predicted that prices will reach $339 an ounce in
coming days. "People want to own gold."

Goldman, Sachs & Co. analyst Daniel McConvey cut his rating for
three gold-mining companies, saying gold prices will have a hard
time rallying further "due to weakness in physical jewelry
demand."

He lowered his rating to "market performer" from "market
outperformer" for South Africa's AngloGold Ltd. and Canada's
Barrick Gold Corp., and downgraded Australia's Newcrest Mining
Ltd. to "market outperformer" from "trading buy."

The Standard & Poor's 500 Gold Index has soared 44 percent this
year, making it the best performing industry group in the S&P
500.  "If we start getting more negative comments from the
analysts, this could put some pressure on the gold market," said
Carlos Perez Santalla, president of Hudson River Futures in New
York. "Right now, everybody still wants to be in gold."

Demand for gold in Japan more than doubled in the first quarter
from the same period a year earlier to 56.5 metric tons,
according to the London based World Gold Council. Some Japanese
investors converted savings into gold after the government
imposed a limit on insurance coverage for bank time deposits.

Changes in mining company hedging strategies have reduced
available supplies on the market, contributing to the rally.

When prices are falling some gold companies lock in prices by
signing sales contracts for future production. They also can sell
borrowed gold and repay the loans with lower cost bullion mined
in the future.

Newmont this month said it had reduced its hedges by about
250,000 ounces to 7.3 million ounces in the first quarter and
will liquidate another 1 million ounces during the rest of the
year.

The company said it was reducing forward sales inherited in its
acquisition of Australia's Normandy Mining Ltd. Newmont in
February completed the acquisition of Normandy and Canada's
Franco Nevada Mining Corp. for almost $7 billion to become the
top gold producer.

Full at:
http://www.riskcenter.com/cgi-bin/article.pl?id=4945