Gold Prices Jump in Europe
LONDON, Sep 27, 1999 (AP Online via COMTEX) -- Gold prices surged today
by 6 percent after European central banks surprised markets with a plan
to limit their annual bullion sales.
The increase of more than $16 per ounce was the largest day-to-day rise
in gold prices in at least nine years.
Gold jumped to a high of $285.00 an ounce in the wake of the
announcement Sunday by 15 central banks that they would cap their
combined gold sales to 400 tons per year for a total of five years.
Prices settled back in midday trading to $283.00 an ounce, still up
sharply from Friday's closing price of $268.60. Much of today's
increase stemmed from purchases by traders who had bet on a slide in
gold prices but who then rushed to buy futures contracts to hedge their
short positions.
The rebounding price marked a dramatic turnaround from recent pessimism
about gold's long-term prospects.
Analysts said the group of central banks acted to restore stability to
gold prices by removing the uncertainty that a central bank might
suddenly sell some of its reserves and drive prices down further. The
central banks also agreed not to increase their leasing of bullion.
John Slater, an economist at National Westminster Bank Group, said
their decision ''obviously puts a floor now under the price.''
World gold prices had declined markedly since May, when Britain's
Treasury announced its intention to sell much of its reserves and
replace them with securities denominated in dollars, yen and euros --
assets that offered a better financial return.
The Bank of England auctioned 25 metric tons of gold last Tuesday, its
second such sale of reserves this year. Switzerland's central bank and
the International Monetary Fund also had expressed an interest in
selling off some of their gold holdings.
''The fear in the market that the Bank of England's sales would lead to
further banks' selling is very much reduced now,'' Slater said.
Rhona O'Connell of T. Hoare Canaccord, a London-based brokerage
specializing in precious metals, said she expected the central banks'
strategy to help push gold up to $320 an ounce by the end of the year.
Monday's increase was the largest rise from one trading day to the next
since Aug. 10, 1990, when the price for gold in London shot up by
$14.95 an ounce, according to Gold Fields Mineral Services Ltd., a
London-based precious metals research firm.
Gold, traditionally a haven for investors in times of turmoil, peaked
at $875 per ounce in January 1980 -- a time when U.S. inflation rate
was in double figures, oil prices were rising rapidly and Soviet troops
were entering Afghanistan.
Copyright 1999 Associated Press, All rights reserved.
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By BRUCE STANLEY
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