Printer Friendly

GOLD JEWELRY FABRICATION INCREASES 4 PERCENT TO A NEW RECORD; GOLD MINE PRODUCTION GROWTH SLOWS TO 2 PERCENT -- LOWEST IN THE PAST DECADE

GOLD JEWELRY FABRICATION INCREASES 4 PERCENT TO A NEW RECORD; GOLD MINE PRODUCTION GROWTH SLOWS TO 2 PERCENT -- LOWEST IN THE PAST DECADE
 LONDON, May 19 /PRNewswire/ -- Despite fears early in the year of a decline in jewelry fabrication rose by almost 4 percent to a record 67.9 million ounces in 1991, according to the latest edition of the annual Gold Survey ("Gold 1992") from London-based Gold Fields Mineral Services Ltd. (GFMS). Although Western World mine production also rose to a new record, manufacturing demand (excluding scrap) exceeded this by an unprecedented 11.3 million ounces. However, a sharp fall in investment demand and the low level of speculative interest in gold resulted in the price declining during the year with a year-on-year fall of 6 percent in U.S. dollar terms.
 Jewelry fabrication was strongly influenced by the rapid rise in demand from China as well as by re-stocking in the Middle East after the Gulf war. The strongest regional growth took place in the Far East, where the fabrication of gold, predominantly into high-carat jewelry, increased by a remarkable 8 percent.
 Electronics, dental and industrial uses of gold remained largely unchanged. Coin fabrication, however, increased by more than a quarter to 4.8 million ounces, although this was due to a single large issue of 1.9 million ounces in Japan, without which coin sales would have declined sharply.
 One of the main features highlighted by the Survey is the slowdown in the rate of growth in world gold mine production. Although Western World mines increased their output by 2 percent last year, to 57.3 million ounces, this was the lowest increase in the past decade. The report suggests that "mine production is edging towards a plateau if not a peak," as a result of the increasing difficulty in attracting finance for new mines and the depletion of the industry's reserves due to a decline in exploration expenditure.
 The impact on supply of producer forward sales and gold loans, often cited as placing a cap on the gold price, was much lower, at a net 1.3 million ounces, last year. At the end of 1991, outstanding commitments to deliver future production against these positions amounted to almost 32 million ounces, representing more than a half of annual Western World production. Although this gold has in effect been pre-sold, the prospect of cumulative forward positions increasing, if other producers start to hedge more aggressively, has acted as a depressing influence on the price.
 GFMS estimates that sales from the Soviet Union fell slightly in 1991, although, in addition, a portion of the country's somewhat limited remaining gold reserves were swapped for foreign exchange. The report reveals that over 32 million ounces of gold were shipped to the West by the Soviet Union in the past three years, with up to 20 percent being used for swaps. Outstanding Soviet swaps doubled last year to 6.4 million ounces at year-end.
 The Official Sector reverted to being net sellers of gold, with sales outweighing purchases by 3.4 million ounces. However, it was private sector holdings which generated the biggest shift in the market. Contrasting net buying in 1990, there was an implied disinvestment of 7.7 million ounces last year. The change came from disposals of bullion and coins by European holders and sales out of stocks held in Europe on behalf of Japanese and Middle Eastern investors.
 The Survey points out that neither dramatic political developments nor economic uncertainty provided an environment conducive to a strengthening of the gold price. The rapid resolution of the Gulf war and the break-up of the Soviet Union brought with them an easing of political tension: developments which contributed to a fall in investor interest. The weakness of economic growth in many countries provided little impetus for growth in overall demand, while a fall in inflationary pressures and continued high real interest rates combined to limit the attraction of gold as an investment.
 In contrast to the strength of the jewelry market, total hoarding of gold in Latin America, the Middle East and Far East declined, leading the report to consider whether "the behaviour of bar hoarders in Asia is now becoming more similar to that of Western investors, with a falling price promoting disillusioned sales rather than bargain-hunting purchases."
 In looking to the future, the report points out that, with the price of gold having fallen to a level at which more than a third of the producing industry is unprofitable, and with consumer spending and inflation near cyclical lows, the outlook should be more positive. The vitality of the jewelry market last year, despite generally weak conditions, indicates that a "sustained economic recovery would result in a renewed acceleration of demand for gold jewelry." The recent fall of the price to its lowest level in real terms since the early 1970s may signal that the four-year bear market is coming to an end. However, it is possible that, if economic recovery is subdued, the decline in the price might generate additional sales by existing holders of gold, thus continuing the period of market weakness for some time to come. On the other hand, a scenario of either strong economic growth or alternatively, of massive asset deflation at the other extreme, would help gold by boosting jewelry consumption or investment demand respectively, which might lead to the gold price making up some of the ground lost in recent years.
 SUMMARY TABLE
 GOLD SUPPLY AND DEMAND IN THE WESTERN WORLD
 (in million ounces)
 1990 1991
 SUPPLY
 Mine Production 56.1 57.3
 Net Communist Sales 13.7 7.3
 Official Sector Sales --- 3.4
 Old Gold Scrap 15.7 13.2
 Implied Disinvestment --- 7.7
 Gold Loans 0.2 ---
 Forward Sales 8.0 1.6
 TOTAL SUPPLY 93.7 90.5
 DEMAND
 Fabrication
 Jewelry 65.5 67.9
 Electronics 4.8 4.7
 Other 8.2 9.2
 Total Fabrication 78.5 81.8
 Official Sector Purchases 2.1 ---
 Bar Hoarding 7.6 8.4
 Hedging --- 0.3
 Implied Investment 5.6 ---
 TOTAL DEMAND 93.7 90.5
 Totals may not add due to rounding
 (source: "GOLD 1992")
 Note to Editors: Gold Fields Mineral Services is a London-based
 commodity research company, specializing in
 precious metals. The company was formed in
 1989, following the takeover of Consolidated
 Gold Fields Plc, which had previously published
 the annual Gold Survey. Copies of "Gold 1992"
 are available at a price of US$95 from the
 Gold Institute, Suite 240, 1112 16th St. NW,
 Washington, DC 20036.
 Telephone: 202-835-0185; Fax: 202-835-0155.
 Press Contact: Dr. Stewart Murray (Chief Executive), Gold Fields
 Mineral Services Ltd. Greencoat House,
 Francis St., London, ENGLAND SW1P 1DH
 Telephone: 44-71-828-8040
 Fax: 44-71-233-5096
 -0- 5/19/92
 /CONTACT: Stewart Murray of Gold Fields Mineral Services, 071-828-8040 (London); or James Hill of Newmont Mining, 303-837-5977/ CO: Gold Fields Mineral Services Ltd. ST: IN: MNG SU:


MC -- DV009 -- 1706 05/19/92 10:19 EDT
COPYRIGHT 1992 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:May 19, 1992
Words:1160
Previous Article:BALL CORPORATION ANNOUNCES NEW CONTRACTS IN ITS COMMUNICATION SYSTEMS DIVISION
Next Article:BIOSPECIFICS TECHNOLOGIES EXPLORES LICENSING OF PHARMACEUTICAL PRODUCTS TO IVAX
Topics:


Related Articles
YEAR-END RESULTS FOR AMAX GOLD EARNINGS DOWN 25 PERCENT - RESERVES INCREASE 78 PERCENT
ECHO BAY ANNOUNCES 1991 EARNINGS
AGNICO-EAGLE BREAKS INTO BLACK IN HALF CEMENTING EARLIER TURNAROUND
ECHO BAY REPORTS SECOND QUARTER RESULTS
ECHO BAY REPORTS THIRD QUARTER RESULTS
WORLD GOLD DEMAND UP 24 PERCENT IN FIRST QUARTER DEVELOPING MARKETS REGISTER 36 PERCENT GROWTH
ECHO BAY REPORTS SECOND QUARTER EARNINGS
ECHO BAY REPORTS FIRST QUARTER EARNINGS
World Gold Producers Forecast Increases in Mine Production
Shining bright.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters