Reserve banker calls for regulation of gold sales - Financial Times, Tuesday June 15
By Gillian O'Connor Mining Correspondent
Official gold sales need to be co-ordinated, and marketed
through a central organisation, just like sales of government
debt, argued James Cross, deputy governor of the South
African Reserve Bank, yesterday.
His comments follow a fall of about 10 per cent in the
bullion price in a matter of weeks after the Bank of
England's announcement that it plans to sell more than half
its gold reserves. The first auction is due on July 6.
Mr Cross's plan, set out at the Financial Times Gold
Conference in London, is that an organisation such as
the Bank for International Settlements should conduct
regular auctions of official gold.
The auction calendar would be publicised well in advance
and central banks would be free to participate in these
auctions but would remain anonymous until the time
when these sales were declared by the central banks
concerned.
He argued that such a system would have several
advantages over the present ad hoc arrangement where
there is no common sale method.
The Bank of England chose to announce its proposed
auction in detail beforehand, in the interest of
transparency, but many banks sell first and announce
afterwards.
The obvious benefits claimed would be that:
Central banks would not have to individually
maintain the necessary market expertise.
Countries which sell gold from time to time would
not have to announce their long-term intentions
other than state that any future disposals would
be channelled via the regular BIS auctions.
Mr Cross argued that the UK gold sale announcement
was not solely responsible for the recent fall in the gold
price. The imminent IMF and Swiss sales were also part
of the explanation.
The Cross plan is similar to a suggestion made by Terry
Smeeton, former head of the foreign exchange division of
the Bank of England.
In this month's issue of Commodities Now he argued that
there should be some dialogue between the different
authorities preparing to sell gold, that an auction
calendar was necessary and that an honest broker was
needed to promote this dialogue and set the calendar.
Earlier at the conference Jean-Pierre Roth, vice-chairman
of the governing board of the Swiss National Bank,
confirmed that it planned to sell 1,300 tonnes of gold,
starting perhaps as early as next year, but with sales
spread over several years.
He said, however, that the bank had no plans to sell
more than 1,300 tonnes out of its total of 2,590 tonnes.
Kevin Crisp, precious metals strategist at J.P. Morgan,
said that the price of gold was likely to become more
volatile and that it could move in much wider ranges in a
much shorter space of time.
He suggested a range of between $100 and $150 an
ounce over periods of just months. |
