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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Gold Prices Head Higher; Silver Gains Rising Demand, Lower Output Drive Precious Metals Rally

From Staff And Wire Reports

Gold and silver prices continued a New Year’s rally Friday on the strength of rising demand and lower production for the metals.

Gold closed up $1.10 at $395.80 an ounce on the New York Comex spot market Friday, the highest in almost six months. Silver closed up 14 cents at $5.50.

“Most dealers are convinced now it is only a matter of time before we hit $400,” said Ted Arnold, an analyst with Merrill Lynch in London.

Demand for physical gold in the form of bars, jewelry, electronics and coins rose 8.5 percent to all-time high of 3,550 metric tons in 1995, according to a preliminary report by Gold Fields Mineral Services Ltd., published Friday.

“The interest of speculative funds is based on very stable reasons,” said Nick Moore, an analyst with Ord Minnett Ltd. in London. “Gold demand has blossomed under the stable price of 1995, as evidenced by today’s GFMS report, and the supply-demand balance looks very exciting.”

Higher gold prices mean more profits for local mining companies such as Spokane-based Pegasus Gold Corp. Pegasus stock closed Friday at $16, up 88 cents from Thursday and $2.12 from the start of the week.

Other local mining stocks showed strong gains for the week. Hecla Mining Co. closed up 88 cents at $7.75. Coeur d’Alene Mines rose $1.87 for the week to close at $19. Sunshine Mining & Refining Co. rose 31 cents to $1.56.

Silver prices have closely followed gold’s rise after hovering near $5 an ounce through December.

Higher silver prices could spur interest in reopening idled silver mines in Idaho’s Silver Valley, though prices have a long way to go before that would happen, mining analysts say.

The gold rise was largely attributed to rising jewelry sales in India and the Middle East, which together consume more than 950 tons per year, or three-tenths of world demand.

“Given the enormous head of bullish steam that is swirling about in the market we are going for targets of as much as $420 an ounce (for London spot gold) before the market finally runs out of steam,” said Arnold. “There is very little producer selling about.”

When miners sell the rights to their future production they often borrow gold from central banks during the interim period.

Forward sales amounted to a record 511 metric tons last year and this pushed the cost of borrowing gold to all-time highs in November.

In that month, South African miner JCI Ltd. is believed to have forward sold 200 tons worth of gold that it will produce in coming years, causing a supply crunch in the lending market.

, DataTimes