gold ...aussie shares take off

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    Gold shares take off as bullion shines
    By Guy Mosel
    May 10, 2003

    AUSTRALIAN gold producers are riding high on surging global gold prices - and experts say that the long-term outlook remains positive.

    After peaking at a six-year high of more than $US380 ($A589) an ounce in February, gold prices slipped to about $US320 in early April, but a strong run has seen it this week push back up above $US340 for the first time in more than a month.

    The recent performance of many gold companies has mirrored the commodity's rise.

    The Australian Gold Council (AGC)/Macquarie Gold index of gold producing companies has risen more than 8 per cent since the gold price began its run, putting on more than 140 points to 1845.7.

    Since gold began its month-long run, shares in Australia's leading gold producer Newcrest have added 20 per cent or $1.21 to close at $7.21 yesterday.

    Lihir Gold has also experienced growth with shares gaining 10 per cent in the last month to $1.38, Sons of Gwalia has picked up 19 per cent to $2, and Newmont has firmed 7 per cent to $4.46.

    And the longer term future looks bright for gold producers with a recent report by Sydney-based commodities research group, AME Mineral Economics, forecasting a long-term gold price rise out to 2007.

    AGC chief executive Tamara Gorrie said the rising gold price was a combination of a number of international and local factors.

    "The declining US dollar is the primary factor driving gold price gains in recent weeks, and particularly in recent days," Ms Gorrie said.

    "But that is coupled with other more longer term factors, such as volatile equity markets, an uncertain geopolitical situation and the global threat of terrorism.

    "This is also coupled with reductions in gold production on the back of five years of plummeting gold exploration expenditure."

    Ms Gorrie also said the gold producers had made an effort to reduce their hedged positions which had contracted supply and pushed up demand, lifting prices.

    She said that even though the main driver of the recent gold surge was the US dollar's recent poor form, the longer term prospects for gold prices and Australian gold production were good.

    "Gold is the ultimate safe haven asset - the asset to have in times of fear and uncertainty.

    "It's definitely benefiting from an environment that can be described as fairly uncertain and there's no reason to believe that's going to change in the near future.

    "I have every confidence that the gold price will remain buoyant and analysts are forecasting a trading range of between $US320 and $US350 an ounce.

    ABN Amro director Chris Brown said gold had been neglected as an investment medium and the commodity's recent strength was not a passing phenomenon.

    "I don't think this is temporary," Mr Brown said. "I believe we are looking at unsustainably low gold prices. With the absence of forward selling - which the producers have traditionally done - I think there's a stocks and flows imbalance.

    "We're seeing a readjustment as people become concerned about the US dollar, but I expect that gold will strengthen more than the US dollar will decline."

    The Courier-Mail

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