The Hindu Business Line : Gold to trade in $355-395 range

``In the short term prices will probably move lower resulting from the speculative overhang of long positions on Comex, weak current demand for price-sensitive fabrication and new surge in scrap supply.''

Mumbai , Oct. 12

FOR the second-half of 2003, the core gold price range will be $355-395 an ounce, with average of $ 368/oz, while the downside is limited to

approximately $350/oz, the London-based Gold Fields Mineral Services Ltd (GFMS) said in its price outlook.

Presenting the GFMS Gold Update-I for 2003 here, Mr Paul Walker, Finance Director and Asian analyst with the reputed precious metals consultancy said, ``In the short term prices will probably move lower resulting from the speculative overhang of long positions on Comex, weak current demand for price-sensitive fabrication and new surge in scrap supply.''

A renewed uptrend was possible after price correction, Mr Walker pointed out. He reasoned that underlying growth in investment demand - not just gold price driven but also economic/political environment as also continued de-hedging albeit at a reduced rate were supportive. In addition, there is belief that the worst for fabrication demand was over (unless major rise in price occurs).

On gold supply and demand fundamentals for first-half of 2003, GFMS found total supply was up 7.3 per cent to 2,033 tonnes. This was the result of higher old gold scrap supply — up 107 tonnes or 26.3 per cent to 513 tonnes in H103, while mine production was up 1.8 per cent or 21 tones to 1,227 tonnes.

Official sector sales were up 10 tonnes to 292 tonnes in H103. On the demand side, GFMS found producer dehedging increased by 127.8 per cent to 308 tonnes, while total fabrication demand was down 1.8 per cent following decline in jewellery demand by 4.2 per cent or 55 tonnes to 1,240 tonnes in H103. Terming India as a big `swing market', Mr Walker said given the price sensitivity, Indian demand for gold was expected to be largely unchanged, but with a possible up side.

On silver, GFMS is not bullish as the market is expected to be close to balance. Stocks in London are said to be high. Average London price in 2002 was $4.59/oz. Factors impacting silver demand included reduction in industrial demand including photography. Total supply in 2003 is expected to be down 4.5 per cent to 25,632 tonnes following reduction in mine production.

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