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Gold hedging knocks Placer Dome for loss
Gold Executive Sees Tight Supply Keeping Prices High
From Reuters
Wednesday, July 27, 2005
http://today.reuters.com/news/newsArticleSearch.aspx?
storyID=335925+27-Jul-2005+RTRS&srch=Newmont
NEW YORK -- Gold supply constraints will prevent the price of the
metal from falling below $420 per ounce in the short run and it will
almost certainly rise again in September or October, a Newmont
Mining Corp. executive said on Wednesday.
"June and July are usually the lowest for the gold price," said
Newmont President Pierre Lassonde, also chairman of the World Gold
Council. "But gold does not want to go below $420.
"If it does not want to go down, come September or October it will
go up, given the supply situation. Gold is in a continuing rising
period."
Lassonde, whose comments came during a conference call with analysts
to discuss Newmont's second-quarter earnings, told the Reuters
Mining Summit in June he saw gold selling for $525 per ounce within
six months. It closed on the COMEX in New York on Wednesday at
$424.90.
"It is very difficult to see a huge increase in supply (of gold) in
the next few years," Lassonde said on the Newmont call. Unlike in
the 1980s and 1990s, when there was a doubling of production and a
rash of new mining and prospecting technology, there is little
exploration going on today because of civil conflicts or government
policies and longera lead times to obtain mining permits.
It now takes 7-10 years from exploration to production at a mine,
compared with 4-7 years in past years. "But with time, production
will start to go up," said Lassonde.
"On the other side of the coin, there is strong demand. It was up 23
percent in the first quarter and jewelry demand is up 11 percent in
China. There is large investment demand."
Asked about the effect on gold prices of the revaluation of the
Chinese yuan, Lassonde said it was "much ado about nothing. It was
the smallest revaluation on record and what we expected."
But he said it might prove significant in the longer term, because
it might permit other Asian currencies, like those of Malaysia and
South Korea, to revalue.
"I bet you, dollar for dollar, that in 10 years time the RMB (yuan)
will be 60 percent higher than today. And it will have a significant
impact on the gold market and commodities markets.
"With a stronger currency, they (China) will compete for oil and
everything else they need," said Lassonde.
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