Gold price jumps: oil down again

Press, 17 January 1986, Page 8

Gold price jumps: oil down again

NZPA-Reuter London Prices of two key commodities — gold and oil — have moved. Gold prices closed in London on Wednesday (early yesterday, N.Z. time) at their highest for 13 months after a day of hectic business which dragged the market out of the doldrums following months of thin, dull trading. At the London close, bullion had risen about JUSS.SO from Tuesday to $U5346.20 an ounce, the highest since November 15, 1984.

Gold, a traditional haven for funds in times of political uncertainty, has been benefiting from the war of words

between the United States and Libya.

Dealers said inflationary expectations were low, oil prices weak, and the U.S. dollar was not showing any major strength on world currency markets — all factors which usually dull gold’s allure. Prices temporarily rocketed to more than SUS 347 on March 20, 1984, as fears about the health of the banking system caused panic buying. But prices crashed to well below this week’s levels by the close. New cuts have been announced in oil prices, and analysts in New York say there are signs that members of the Organisation of Petroleum Exporting Countries are

adding to a downward spiral. Saudi Arabia’s oil production soared to an average of nearly six million barrels per day (b.p.d.) during the first week of January, industry analysts said, and Saudi output may have reached as much as 7M b.p.d. for at least one or two days at the beginning off the year. OPEC output for January has averaged above 17M b.p.d. after 18M b.p.d. last month. World demand for OPEC oil is estimated at best at 16.9 M b.p.d. Under OPEC’s production agreement, Saudi Arabia acts as a “swing” producer, to maintain the group’s over-all production at 17M to 19M

b.p.d. Saudi Arabia has been producing about 4.35 M b.p.d., its allotment under an OPEC ceiling agreement, in recent months. Last July its output fell as low as 2.2 M b.p.d. At its peak in 1980 Saudi output averaged 9.9 M.

Rising Saudi output, the desire of other OPEC nations to hold on to their market share, and higher output from nonOPEC nations has removed any fears of a supply squeeze this northern winter.

Analysts said these were the factors behind a series of cuts in posted prices in the United States and in other countries in the last two weeks.