More drooy stuff:
LONDON -- The gold industry is asking whether investors should be protected from volatility in the gold price and have even recommended that a line be struck through the Washington agreement, a pact signed in 2000 to limit the amount of central bank sales. The growing belief is that gold ought to fend for itself in a free market and be treated as a bona fide reserve asset.
Evidence of the bolder attitude was the outstanding feature of the Association of Mining Analysts conference in London on Thursday (23 May) and is no doubt stirred by the advance in the dollar gold price. Amid the likelihood of less rather than more producer supply, and continuing world political uncertainty, the fresh confidence purports that the gold price can fend for itself.
Reg Howe, who was the principal in the case bought against certain US institutions among others for gold price manipulation, said the Washington Agreement ought to be scrapped largely because central banks would start to accumulate gold. In contrast, Mitsui Metals analyst, Andy Smith, argued that it was likely central banks were looking to dump gold reserves again, but he agreed gold needed to operate in a free market and take whatever conditions lay ahead of it "on the chin". Gold was echoing the adjustment in the silver price more than 100 years ago when it was allotted a value at purchasing parity, he said.
Howe and Smith don't agree where the gold price is heading in the long-term but they do agree that gold bullion doesn't need regulatory crutches. The Washington Agreement placed a moratorium on the sale of more than 400 tonnes of gold a year by the world's major central banks. The agreement is up for renewal in 2004.
Durban Roodepoort Deep (DRD) chief executive, Mark Wellesley-Wood, said his investors preferred volatility in the gold price and that it should be prized for its cache as money. It was also for this reason that he flatly refused to contribute to gold marketing initiatives backed by the World Gold Council (WGC) and the Gold Producers Initiative in the past. Initiatives by these organisations, which attempted to promote gold jewellery for example and diversify risk away from gold's investment market, sought also to treat gold as a commodity. "Let gold market itself. I believe this because gold is money," Wellesley-Wood said.
"Why should we contribute the equivalent cost of $4.00 per ounce of gold to the WGC when through sweat and tears we have been able to reduce our G&A costs at DRD by $5.00 an ounce," Wellesley-Wood said. Plans by Chris Thompson, Gold Fields's current executive chairman and WGC president-designate, to introduce a gold-backed instrument to develop the gold investment market would, however, be whole-heartedly supported by Wellesley-Wood.
In a sidelight to this issue, DRD is considering issuing gold-backed dividends following its June year-end. A share buy-back is also under discussion.
Wellesley-Wood, who is also executive chairman of Durban Roodepoort Deep, also confirmed an earlier Miningweb report that the company had placed shares to accelerate the close out of its hedge book positions. About 10 million new shares were placed raising about $40 million of which $35 million will be used to reduce the hedge book by half to 125 000 ounces. "The gold price in Rand terms is now the lowest it has been since early December 2001 and, given our intention to eliminate our hedge book, the timing seems favourable," the company said. |
