Gold prices will languish until mid-1998 before tracking higher later in the year, according to an industry report prepared by the brokerage firm Macquarie Equities Ltd.The firm is part of the Macquarie Bank Ltd group, Australia's biggest bullion dealer. It conducts 25 per cent of the world's gold hedging through its joint-venture with South Africa's Standard Bank.
The negative factors which had sent the price plummeting would most likely wane throughout the year, adds the company. "The sentiment will turn slowly back in favour of the yellow metal," Macquarie Equities said. It attributed the fall in the gold price to its lowest level in 18 years to fears of further central bank sales, low inflationary expectations, a strong US dollar, gold "dishoarding" in south-east Asia, and a lagged response from mined gold production to lower prices.
The low point of the price cycle would be reached in the first half of 1998, with a modest improvement in the second half of 1998, Macquarie said. Macquarie sees thegold price trading in a band between US$ 280 and US$3 00 an ounce in the first six months of 1998 and then breaking out to above US$ 300.00 in the second half. This is seen producing an average price of US$ 290 an ounce for the full 1998, and US$ 350 an ounce by 2001.
The gold price would be supported medium-term as inflation risks reappeared, the US dollar weakened and mine and market rationalisations occurred, Macquarie said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
