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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Henry Volquardsen who wrote ()	5/29/1998 9:23:00 AM
From: Henry Volquardsen	of 3536

To Cytotekk With a lot of the world governments selling off portions of their gold reserves, I just wonder... 1. How stable will currency be in the future and 2. Where is all the gold going? The selling of gold by the world governments hasn't been extensive enough to qualify as 'selling off their gold'. The only sellers of gold over the past few years have been Belgium, the Netherlands, Austria, Australia, Canada and Argentina. There may be one other I am forgetting for the moment. Belgium and the Netherlands were selling for balance sheet reasons related to the coming of the Euro. Austria didn't sell that much and what they sold was as coins sold to the Austrian public. Canada and Argentina have both made decisions, I believe, to sell all their gold. Australia I believe was just a partial reduction in holdings. Some of the gold sold was bought by other central banks. Taiwan and Japan are both known to have bought over the last few years. The central bank gold sales have not been that large in relation to overall holdings. The significance was because the added supply made up for the shortfall in production vs demand and kept the price under pressure. That and the fear that other Europeans would sell for balance sheet reasons leading up to the Euro. I believe that fear is unfounded. You said The last I have heard on National Public Radio, the matter has not been decided upon. in relation to the gold backing of the Euro. I believe nothing will ever be formally announced. Central banks don't act that way. There has never been a question of whether the Euro wil be gold backed, it won't, the question has been just how much gold would be in the reserves. They won't announce it but both the Italians and Belgians have made statements that imply 20 to 30% of reserves. Not much different than the current composition of reserves. The politicians have been more than willing to be fuzzy in their comments on the issue because there is still a lot of public nervousness about the strength of the Euro, especially in Germany, and they are more than willing to give the impression of strong gold backing. Barrons has stated that one proposal for the Euro Dollar % of gold back was more than 30%, I heard this second hand. My apologies but I can't figure out what this is supposed to mean. What specifically does 'Euro Dollar % of gold' mean? How does the dollar come into the picture when discussing gold in relation to the Euro? There is a Eurodollar which is something entirely different and may cause some confusion. Also it would be interesting to see who it was at Barrons that reported this. Was it one of the reporters or one of the columnists? Henry

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