Guyana braces for fallout as gold prices slide

Apr 14, 2013 News

– authorities to meet miners, other stakeholders tomorrow

By Leonard Gildarie

A critical meeting is set for tomorrow between Government and miners to assess the fallouts from a worrisome drop in gold prices on the world market.
Prices had fallen to US$1,477.60 per ounce of raw gold, yesterday. It had reached a high of over US$1,900 as nervous investors in face of the global financial downturn, banked on the metal.

Gold miners

Guyana especially would be jittery over the price drop which in all indications will continue its slide in the days to come.
Gold has become the country’s biggest foreign exchange earner, eclipsing the performance of the mainstay products sugar and rice.
The gold fields have steadily been attracting workers from the forestry, construction and even the sugar sector as the lure of the shiny metal and high paying jobs proved too much. Local banks have been all too happy to lend millions of dollars to buy equipment and to fund operations. Excavators, which could cost up to $40M each, have been selling like crazy.
More than US$100M has been invested each year for the past three years or so, Government has said. Last year, gold production reached a record breaking high of 438,645 ounces, in the absence of large scale producer Omai Gold. The commodity earned US$737M.
According to the Ministry of Natural Resources and the Environment yesterday, it has been following the downward movement of the price of gold which recorded its lowest in the last 21 months on Friday afternoon.
“This is the lowest level of prices for gold since July 2011.”
According to the Ministry, cuts in 2013 gold average price forecasts by Deutsche Bank and Goldman Sachs triggered technical selling. Earlier this week, Deutsche Bank lowered its average gold price forecast for 2013 by 11.8 percent to US 1,637 dollars an ounce, while Goldman Sachs slashed its gold price forecast for 2013 from US 1,610 dollars an ounce to US 1,545 dollars.
In addition, the U.S. economic data released Friday dampened gold.
According to the Ministry, its Minister, Robert Persaud, will be leading a team to the special meeting tomorrow. The meeting will involve all licenced gold dealers and members of the gold sub-sector “to discuss the various issues and impacts of the volatility in gold prices on the local economy”.
New reports are now indicating that the gold price bubble seems to have burst.
Prices came under pressure, following heavy selling by institutional investors, amid fears central banks would act on the lines of the European Union, which had said Cyprus needed to sell gold reserves to raise about euro 400 million to meet its financing needs.
According to World Gold Council’s latest data, Cyprus holds only 13.9 tonnes of gold (62.4 per cent of its total reserves). Now, there are concerns that other struggling countries such as Portugal, Ireland, Italy, Greece and Spain may be pushed to do the same.
Together, these countries hold about 3,230 tonnes of gold, worth about euro 125 billion.
Gold prices saw about a decade of Bull Run – from 2001 to September 2011 – when prices rose to a high of $1,900/oz, resulting in returns of about 700 per cent. From that peak, prices have fallen about 22 per cent.