Get ready to buy by 11 amm :)
German support for IMF gold sales
may knock prices
By Marius Bosch
LONDON, June 13 (Reuters) - Bullion prices may weaken
further in the wake of Germany's decision to back the sale of up
to 10 million ounces of IMF gold to finance debt relief for the
world's poorest countries, dealers and analysts said on Sunday.
''I can see them give the gold price another kick. I expect that 90 percent of this news is already in
the gold price but they may just take it as another excuse to take it further down,'' said Michael
Wagner, chief trader at Frankfurt-based brokers Brandeis, Hauck & Partner.
German Finance Minister Hans Eichel said on Saturday that Bonn would back the sale of up to 10
million ounces of gold, amounting to around a tenth of its total holdings and worth about $2.6 billion
at current prices.
Most major industrial countries have for some time backed the sale of IMF gold but Germany
opposed such a move until recently.
Analysts said the German backing for IMF gold sales almost certainly meant further weakness in the
gold price. Spot bullion prices have fallen more than $30 since May 7 when the U.K. Treasury
announced plans to sell 415 tonnes of its 715 tonnes of gold reserves.
''I think maybe this is just another shift from the Germans, moving towards what seems to be the
consensus view that the IMF should sell some gold,'' said Phillip Klapwijk, managing director of
industry consultants Gold Fields Minerals Services.
''At the moment sentiment is very negative and I would imagine most news would be interpreted
bearishly,'' Klapwijk said.
But he said with the huge short positions in the gold market at present, a swing in the gold price
could not be ruled out although this was unlikely before the first British gold auction, on July 6 when
the Bank of England will put 25 tonnes up for sale.
Wagner said dealers had started to think that sole hope for gold would be if producers began to cut
back on production.
''The only thing that could save the gold price is closure in mine production and if you see another
$10 fall that would start,'' he said.
Bundesbank president Hans Tietmeyer said on Sunday that the question of selling IMFgold should
be studied more carefully and professionally.
Tietmeyer said in an interview on German radio that the German central bank, which has long
opposed such a move, was not dogmatically against the idea, but would have to be convinced of the
economic sense of such a move to give its approval.
Tietmeyer said, according to a transcript of the interview: ''For the Bundesbank this is not a question
of belief but rather a question of the economic response.''
Tietmeyer repeated that the Bundesbank's preferred way to reduce debt would be through bilateral
agreements.
But, he added, ''If that is not enough, and it appears that it may not be enough, then one must
certainly look into the question of whether the gold reserves can be used in part, and by that I mean
in a very small part.''
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