Gold slumps on suggestion IMF sell gold to ease nations’ debt

The volatile price of gold took a turn for the worse recently when the U.S. Treasury Department suggested the International Monetary Fund (IMF) use its gold holdings to help its member nations ease their debt problems. In New York, the price of the precious metal dropped US$5.70 per oz. to US$412.35. In Toronto, the TSE’s gold index declined by 3.7%.

The IMF, an international lending agency, is reported to have 103 million oz. of gold reserves. The concern of investors was a flooding of the commodity markets of the precious metal.

The U.S. agency’s proposal would have involved moving a small portion — some reports said up to US$4 billion worth — of the IMF’s holdings. Analysts said the probable intention was to use the gold as collateral to get loans from central banks to pay for the over- due loans.

Gold all but recovered in New York the next day, closing at US$418.

Giant nickel producer Inco wants to sell a 20% interest in P.T. International Nickel Indonesia to the public.

Inco, which currently has a 78% interest in the Far East company, sold off 20% of P.T. Inco in 1988 to Japan’s Sumitomo Metal Mining. It is estimated this latest sale could raise about $350 million for Inco, which sells about 30% of its nickel in Japan and Asia (compared with 30% in Europe and 30% in North America).

An expansion project under way at P.T. Inco will increase annual nickel production there by 30% to 105 million lb.

Potash Corp. of Saskatchewan is expecting lower profits for 1989, the company’s markets having been affected by weather conditions in the U.S., a rising Canadian dollar and offshore political and agricultural conditions.

Canada is the leading producer in the non-communist world of potash, which is one of the primary ingredients in agricultural fertilizer. The mineral is used extensively in the U.S.

President C.E. Childers said that although Americans paid more for his company’s potash during the first three quarters of 1989 compared with 1988, they used less. Spring sales were down last year, and a late harvest and early snow last autumn resulted in significantly lower U.S. sales and higher-than- average potash inventories for producers.

More than 90% of the company’s sales are in U.S. dollars. A rising Canadian dollar therefore had a negative effect on the company’s financial results.

Offshore prices were higher in 1989 than the previous year, Childers said, but volumes were lower. Depressed agricultural conditions in major potash-consuming countries such as Japan and Brazil resulted in lower demand for potash and contributed to higher worldwide potash inventories.

China purchased less potash last year than in 1988, while the Soviet Union increased its exports into world markets.

Potash Corp. expects moderately increased volume for 1990 in the North American market compared with 1989 but continued uncertainty in the offshore market.

The total value of output from the Canadian mineral industry increased by an estimated 5.8% last year to $39.1 billion, Energy Mines and Resources Canada reports.

The estimate includes data from the four sectors of the industry: metallics, non-metallics, structural materials and fuels.

Production value of metallic minerals rose by 5.3%, from $13.6 billion in 1988 to $14.3 billion in 1989. Zinc was up by 25.6%, iron ore by 12.8% and nickel by 10.4%. The value of copper was steady at about $2.4 billion despite a drop in production volume of about 7%.

Gold experienced a 17.5% jump in production volume but lower average prices for the metal last year prevented an increase in the value of production beyond the 1988 level of $2.3 billion.

The value of output for non- metallics, including asbestos, potash and sulphur, declined slightly to $2.5 billion from $2.7 billion in 1988.

Structural materials, such as sand and gravel, stone, cement and lime, varied little from 1988 with the value of output remaining at about $2.9 billion.

Value of output in the fuels sector increased by 8.9% in 1989, to $19.4 billion. Principal fuels in terms of value were petroleum, natural gas and coal.

Top commodities for the non- fuel sector were nickel at $3.1 billion, zinc at $2.8 billion, copper at $2.4 billion, gold at $2.3 billion, iron ore at $1.5 billion, uranium at $1 billion and potash at $900,000.

Ontario contributed the largest share of non-fuel mineral output, accounting for 36.6% of the total. Quebec was second with 14.2%, followed by British Columbia with 11.8%, Manitoba with 8.1% and Saskatchewan with 7.4%.