World demand for gold fabrication in the first half of 1993 dropped by 5% compared with the same period last year, despite a strong performance in the first quarter.
Gold Fields Mineral Services of London, England, reports that bar hoarding demand also fell, by 3%, during the period.
Global mine supply continued to increase — it was up by 2% during the first half compared with last year — and there was a sharp decline in the amount of official sector (central bank) gold coming to the market. Producer forward sales positions continued to increase, rising during the first half by some 60 tonnes, which more than offset the repayment of 37 tonnes of gold loans during the same period.
Regarding the outlook for prices, Gold Fields says there is a danger that the liquidation of long positions built up during the first half could keep prices relatively weak.
On the other hand, it lists two developments which could lead to higher prices. First, the return of stronger physical demand as the market moves out of the period of normal seasonal weakness and as dealer, fabricator and retail inventories return to normal from the high levels which had built up by the end of the first quarter. And second, the lowering of European interest rates should offer support to the gold price in the medium-term by reducing the opportunity cost of holding gold as well as boosting consumption, and possibly inflation, in the longer-term.
Earlier this year in London, gold traded as low as US$326.10 per oz. It slowly rose to the $400 level, peaking at $406.70 during the first week of August. Of late, it has been trading in the $360-375 range.
Gold Fields, which publishes an annual survey of the gold market, recently released an update to its Gold 1993 report. Whereas before the breakup of the communist bloc Gold Fields used to report on Western world totals, it now uses global figures.
The company’s researchers project global new mine production of 2,274 tonnes for 1993, up from 2,227 tonnes in 1992.
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