Gold Up, Us Happy, But It Isn't Catching

Sydney Morning Herald

Wednesday January 24, 1996

By JUSTINE TRUEMAN and TOM ALLARD

The Australian sharemarket failed to take heart yesterday from a gold price surging above $US400 and a buoyant Wall Street, with investors developing commodity price blues.

"There's a lot of nervous clients out there because the market is not behaving as you would expect it to," said Mr Julian Gregory of Scott Foster.

Wall Street had risen 34.7 to a record 5219.4 overnight, with most trades in the last 15 minutes after a slow day. The All Ords, however, fell 14 points to 2246.6, in a slide which accelerated in the afternoon amid heavy futures selling.

"There was some index unwinding by arbitragers and one or two players sold the futures down aggressively in the afternoon, which amplified the All Ordinaries move down," said Mr Paul Xiradis of BZW Investment Management.

Precious metals was one of the few positive areas, with the gold price at a 29-month high and silver also strong.

BHP fell 17c to $18.58, WMC 10c to $8.10 and CRA 12c to $18.86. Brokers said a big seller of CRA had been in the market in the past few days. Nervousness about industrial unrest at Weipa was another a factor in the fall.

The negative sentiment in the market affected even the Gold index, which rose a disappointing 0.9 per cent despite the interest in bullion.

"That was largely due to Placer Pacific, which made a disappointing production announcement," said Mr Xiradis. Shares in Placer dropped 15c to $3.05 after production for the year to December was down by about 17 per cent.

Star Mining again was heavily traded on 10.2 million shares, with large institutions recently announcing increased holdings. Yesterday The Capital Group said its holding was up to 10.47 per cent. Brokers said there were plans for the stock to be listed in the UK.

Softer base metals and nervousness about the timing of the Federal election kept sentiment subdued and the Australian dollar capped.

The currency finished at $US73.34, down $US0.15c on Monday's close. The currency is now at a five-month low against the yen. Against the Reserve Bank's trade-weighted index, it was 0.1 points lower at 53.7.

Dealers said US investors remained bearish on the local unit despite the appreciating gold price. The prospect of a $2 billion-plus December current account deficit was undermining the currency.

The bond market was weaker ahead of today's December quarter consumer price index, with the benchmark 10-year yield up 5 basis points to 8.16 per cent. The market expects the CPI to rise by 0.8 for the quarter, taking the annual rate to 5.1 per cent.