OWN CORRESPONDENT, Singapore | Wednesday 10.30am.
GOLD prices, having slumped to the lowest point in 20 years, may have bottomed out and are unlikely to sink further, a World Gold Council official said on Wednesday.
“Prices are already at a 20-year low and given such low prices it is not likely there will be a further drop,” said Koh Tong Huat, regional finance, administration and planning manager at the Council’s Far East office in Singapore.
Huat argued that prices significantly below current levels will cause several mines to go bust because the metal will not be economical to mine, although closures will depend on specific corporate circumstances.
The price of gold fell almost 2% to a 20-year low on Tuesday after the Bank of England sold 25 tons of the metal at below market prices in the first of five auctions that traders expect in the next nine months.
The Bank of England placed the gold at an allotment price of $261,20 and the spot price at one point fell to $257,05 — its lowest level since May 18, 1979.
Asked what he thought of the gold industry’s prospects, Koh said the issue is “more of perception than reality. This is because gold prices are being driven now by a perception that the central banks will offload more gold. But in reality physical demand is running ahead of supply,” he said.
This attitude differs from other World Gold Council statements and those of major players in South Africa that the gold sale regime will have a long-term negative effect on gold prices and the gold industry. By contrast, Koh seems almost sanguine about current trends.
His statements on demand are also debated. Yasuyuki Aioi, sales manager at Japan’s top marketer of precious metal Tanaka Kikinzoku Kogyo K.K., said in Tokyo that the gold price plunge stemmed from a breakdown in the gold supply and demand relationship.
“Demand has been declining since people see putting money into stocks is more attractive for making money,” he said. — AFP