Tuesday October 28 1997
Bullion slides on further
fund sales
SHEEL KOHLI and AGENCIES in London
Gold continued to slide in Europe yesterday, after
fresh selling from investment funds flooded the
market.
In London, gold was fixed at US$311.80 an ounce in
the afternoon, unchanged from the morning fix, after
closing at $316.40 on Friday - a day in which it lost
$6.
After Swiss proposals last week to sell 1,400 tonnes
of its gold reserves, analysts said gold was likely to
fall further.
"I still see $300 as a big downside target," Ted
Arnold, a gold analyst at Merrill Lynch, said.
He said European central banks were likely to step
up gold sales further ahead of the formation of the
European central bank (ECB), which would
administer and control the European single currency.
Mr Arnold said it was assumed that the ECB would
require only a 20 per cent backing of the single
currency by gold, which would leave more than
12,000 tonnes in national vaults.
"And that gold will be increasingly mobilised. Much
more of it will be lent to the market - increasing its
liquidity," he said.
Traders said investment funds, dealers and "even
some old dinosaurs who bought gold on the view that
it would hedge against a stock market crash" were
all selling yesterday.
"We think the next move is down in gold . . . but
even if we have a few good short covering rallies on
the way, they are likely to be utilised as wonderful
forward selling opportunities by producers, dealers
and funds alike," Mr Arnold said.
Paribas Capital Markets analyst Charles Kernot said
the Swiss proposal was the final excuse the market
needed to sell.
"The most negative aspect of the [proposed] sale is
that while it could be done over a number of years, it
highlights the fact that even the nation with the
greatest linkage to gold as a monetary asset has lost
faith," a GNI brokerage house bulletin said.
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