I even heard productivity mentioned witht a negative conotation on CNBC hmmm!
reuters.com
AND
REUTERS ANALYSIS-Gold market looks to renewal of cenbank sales pact
By Clare Black
LONDON, Aug 7 (Reuters) - Speculation has begun to swirl
around the gold market about a European central bank pact to
coordinate sales of the asset ahead of its expiry next year,
with most analysts expecting a renewal in a modified form.
As significant holders of gold who have yet to dispose of
the assetItaly, Germany and France will be closely watched as
the Central Bank Gold Agreement (CGBA) comes up for review in
September 2004 by the 15 banks that hold a substantial portion
of the world's bullion reserves.
Most analysts contacted by Reuters did not expect
discussions to really kick off in earnest before the end of the
year or early in 2004, although there is talk that if the pact
was renewed, it might be at an increased level of gold sales.
"It will depend on who really indicates a desire to sell.
If you don't see one of the big three step up with a big sales
programme, then you could argue they don't need to increase by
100 tonnes (a year)," Kamal Naqvi, precious metals analyst with
Macquarie Investment Bank told Reuters.
Under the current arrangement, 15 central banks -- 11 from
eurozone countries, plus the European Central Bank and those of
Sweden, Switzerland and the UK -- agreed to limit their
collective sales to 2,000 tonnes over a five-year period at 400
tonnes per annum since September 1999.
The banks also agreed gold would remain an important
element of gold monetary reserves and that lending and use of
derivatives would not be increased.
The agreement was prompted by concerns that disorderly
central bank sales were creating massive uncertainty in the
bullion market and was contributing to a depressed gold price.
"Assuming they renew it, I can't see it being any less. If
it was for 400-600 tonnes (per year), I think that would be
okay. Anything more than that and the gold market won't like
it," John Reade, metals analyst with UBS Investment Bank said.
Analysts said that even a renewed agreement at a higher
level of sales that would put extra gold onto the market would
be less disruptive than reverting to the previous system of
uncertainty.
However, with gold prices now some 30 percent higher than
in September 1999, some analysts said a new agreement was
redundant, although they acknowledged it would remove fears of a
flood of uncoordinated sales in its absence.
Also, the current macro-economic environment of a weak U.S.
dollar and ongoing geopolitical uncertainty could enhance gold's
traditional role as a reserve of last resort and thus discourage
banks from selling.
"There is also a whole sort of sub-text about the role of
central banks in Europe without currency management. That might
encourage them to keep gold just to give them a raison d'etre,"
said Alan Williamson, analyst with HSBC.
The creation of the European Central Bank has narrowed the
role of national central banks in the euro zone that no longer
issue currency.
"Effectively the liability side of central banks' balance
sheets has been given up. They do not issue currency," said Andy
Smith, commodities analyst with Mitsui Global Precious Metals.
"Will these be central banks or asset managers?"
THE BIG THREE
"If you look at the declared sellers so far, there really
isn't any need for an agreement. What you would need is for the
Bundesbank, the (central) bank of Italy or of France to come out
as sellers," Williamson said.
According to statistics from the World Gold Council, the 15
signatory banks accounted for around 45 percent of reported
global gold reserves of 32,114 tonnes in July 2003.
Germany, Italy and France alone hold nearly 30 percent of
global gold reserves. Other major holders, who are not part of
the pact, are the United States (8,132 T) and the International
Monetary Fund (3,217 T).
"You've got to believe that some of the countries that have
not had the opportunity to make sales under the (current)
agreement, like Germany for example, will be seeking a more
upfront role in the next one," Kevin Norrish, commodities
analyst with Barclays Capital Research, said.
Last month, several German political leaders urged the
government to sell gold and currency reserves to help finance
plans to cut income taxes in 2004, although Bundesbank
Vice-President Juergen Stark said that was not an option.
Under current legislation, the Bundesbank is obliged to
transfer profits from gold sales to the government.
The Banca d'Italia has so far remained resolutely silent on
the matter, although Societe Generale <SOGN.PA>'s economist Stephen
Briggs said that Italy might also be tempted to look at selling
gold to help plug its deficit.
(Additional reporting by Veronica
Brown)
((Reporting by Clare Black, editing by Allan Seccombe;
clare.black@reuters.com; Reuters Messaging:
clare.black.reuters.com@reuters.net; +44 (0) 20 7542 4985))) |
