To all -
Here is a outline on the gold situation that might help clarify some of the previous posts. I highly reccomend these sites.
Cheers,Bob
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Finance - Precious Metals Report for Friday, October 24, 1997
In alliance with Money Online at money.com
Gold futures prices plunged to 12-year lows Friday after a Swiss
panel of experts formally recommended selling more than half the
country's gold reserves, which would flood the market and could
lead other countries to follow suit.
News of the Swiss National Bank's proposal pushed gold for
December delivery down $16.10, or 4.9%, to $308.30 -- a level last
seen in February 1985.
Proposed changes in Switzerland's monetary policy unveiled Friday
would allow the Swiss National Bank to allocate 1,400 metric tons
of its 2,600 tons of gold reserves for purposes other than
stabilizing the Swiss franc. That raised immediate fears that some
of the gold would be sold on the open market.
The Swiss plan, released by a panel created by the central bank
and the Swiss finance ministry, was particularly unsettling to
investors after gold failed to post substantial gains on Thursday,
despite financial uncertainties that swept through global markets
after the Hong Kong stock market plunged. December gold rose just
$1.10 an ounce Thursday in New York.
Gold often gains sharply at times of financial uncertainties
because it has been seen in the past as a so-called safe-haven
investment.
But the Swiss plan dominated trading on Friday. Under the monetary
plan, seven billion Swiss francs ($4.78 billion) of gold would be
initially earmarked for a proposed fund that would be used for
humanitarian purposes, including paying compensation to Holocaust
victims. The humanitarian fund hasn't yet been sanctioned by
Parliament.
The Swiss National Bank has traditionally valued its 2,600 tons of
gold at an extremely conservative 4,595 francs per kilogram,
compared with a market price of close to 17,000 francs. The
revaluation would bring current gold reserves closer to their
market value of 44 billion francs from the 11.9 billion francs
currently audited.
The finance ministry's proposals for the revision of the country's
monetary constitution will now be submitted to Parliament. A vote
there and an ensuing referendum aren't expected until Spring 1999,
at the earliest. The Swiss people's vote will likely be a de facto
decision on the future of the Humanitarian Fund, which has run
into some public opposition in the past.
The possibility of such a sale could prompt other countries to
cash in on their gold reserves and use the proceeds to invest in
higher-yielding investments, said analyst Bette Raptopoulos at
Prudential Securities Inc.
"It's a lot of gold that the Swiss are talking about," she said.
"But the real issue that has shaken the market is that this
diminishes long-standing central bank commitments to gold and
their reserves and opens the door to a flood of countries selling
their inventories."
Other precious metals were dragged lower by gold. December silver
plunged 15.3 cents to finish at $4.785 per ounce, while January
platinum tumbled $10.90 to $412 per ounce. December palladium fell
95 cents to $203 an ounce, buoyed by continued concern over
available supply.ÿ (WSJ)
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