Gold longs throttled on the flimsiest evidence
By: Doug Pollitt
Posted: 05/25/2001 11:00:00 AM | © Miningweb 1997-2001
The gold market today was rocked by back-to-back announcements of official sector sales. First Russia's President Putin announced his willingness to sign a decree conceivably providing for the sale of gold, as follows: "If in the future and under the appropriate circumstances a bill is presented to me that meets certain criteria, contingent upon the moon being in the seventh house, I might, emphasis on 'might', consider selling a wee fraction of the country's gold reserves to help stricken flood victims."
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The second item, catching the market completely by surprise, originated from statements made by Aardhaus de Glockenspiel, the Minister of Finance of EU aspirant Ruritania. The text of the release is as follows:
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BRESLAU, May 24, (Royters) Gold was trading lower in London this morning, having been undermined by rumours of further central bank sales. The A.M. fix was $279.40, down $2.30 from Wednesday morning's fix.
"Ruritania is thought to be selling," said one trader. "The thinking is they'll dump their gold to raise funds for the relief effort." The East European country is currently suffering from a severe drought. "It's a good time for a portfolio adjustment," said the trader.
The Minister of Finance for Ruritania, Aardhaus de Glockenspiel, denied the rumour. "We have no intention of selling our gold," he was quoted as saying.
Gold accounts for 16% Ruritania's foreign reserves. "That's way above the region average," said Mark Sontag, Executive Director of Research for Lever Bank Corp. "Nobody would be surprised if they sold a little."
Several countries have sold gold over the last decade, Canada, Argentina and Australia among them. "What is surprising here is that this is a Central European country. These countries have been stubborn in the past when it came to selling," said Sontag. "This could start a chain reaction throughout all of Lower Galicia."
The region currently holds 6.2 tonnes of monetary gold.
Lease rates climbed to 2.3% overnight, the highest they have been in some while. Many explanations were offered. "It's probably central bank selling," said Andrew Smythe of Ellekwed Trust. "Past market behaviour clearly shows lease rates spikes to be associated with official sector activity. I don't see why it should be different this time."
Gold has been in a bear market since 1980 and the strains are beginning to show. Ian Grizzle, portfolio manager for the Stockholm Syndrome Precious Metals Fund, concurred that sentiment is bleak. "We are for the most part in cash right now. There is no point in fighting a trend."
In other markets, silver was up 2 cents to $4.59 and platinum was $613, up $4.20.
((Breslau Newsroom, 413 941 8520, breslau.newsroom@royters.com))
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