ECB gold figure dents gold price, divides opinion
01:54 p.m Jun 09, 1998 Eastern
By Patrick Chalmers
LONDON, June 9 (Reuters) - Gold fell nearly $4.00 on Tuesday on news
that European central bankers favoured holding 10 to 15 percent of the
new ECB's reserves in gold, a figure analysts said was below market
expectations.
The fall to $293.00 an ounce followed remarks by European Central Bank
President Wim Duisenberg, who told a Frankfurt news conference a
consensus existed to hold between 10 and 15 percent of the new bank's
reserves in gold.
''Gold is one of the decisions which has yet to be made but there is a
consensus among the central bank governors that part of the reserves to
be transferred to the ECB will consist of gold,'' said Duisenberg after
the inaugural meeting of the central bank council.
Bullion dealers had earlier batted around rumours that gold holdings
might be as much as 27.50 percent of planned ECB reserves of up to 50
billion Ecus ($55.4 billion), meaning the news caught many on the hop
after a day spent buying metal and covering short positions.
''The market is going to take a little bit of time to rebalance. There
was an awful lot of buying this afternoon and now we are heading
south,'' said one analyst, who said that even the upper limit of 15
percent was on the low side.
''It's a low number. We had set our marker down at 20 percent and even
if that had been taken as the benchmark by central banks it would have
implied significant sales.
''I see the pressure remaining on the market now. There's no supportive
news at all in this even though not an ounce more of central bank gold
is yet in the market,'' he added.
''This is about as bad as it could be'' said one dealer, who cited a
series of reasons for price gloom.
''It's a signal to other central banks that the ECB is being pragmatic
about its reserves. This is the real world, welcome to it,'' he said,
adding that major gold holders such as France had failed even to get a
positive spin for gold sentiment in Tuesday's announcement.
''If the French were going to have a public relations opportunity then
this would have been it, they haven't even got that,'' he said.
''There's a world outside Europe and this is about as clear a signal as
they come. Even if the sales are years away the market tends to price
them in, we have already seen the same with the Swiss,'' he said in
reference to Switzerland's plan for major gold sales.
Another dealer disagreed, saying sales were a way off yet given
immediate concerns about the new euro's credibility and that they could
be absorbed when they did eventually come.
''I still feel that we'll stay close to $300 and that 15 percent is more
likely than 10 percent,'' he said.
''I really do believe (European central bankers) are going to keep all
their reserves until they have established the strength of the euro
currency,'' he added.
''When they have established that, which is several years from now, they
will have all sorts of things to sell, dollars, yen and gold,'' he said,
adding that gold should remain in a $287.00 to $307.00 range for the
next while.
Brokers GNI had earlier dismissed the speculation surrounding the level
of gold in ECB reserves, even before Duisenberg came out with his
remarks.
''Remember the percentage of gold held in ECB reserves is a red herring
-- it is irrelevant,'' GNI said in a report.
''Even if 100 percent of foreign reserves was held in bullion, there
would still be sufficient gold held by national central banks to allow
the world's mining companies a two-year holiday if it were sold,'' it
added.
''The real issue is the degree to which (national) central banks can
conduct transactions without informing the ECB,'' it said, adding that
greater autonomy would probably equate to greater volumes sold.
And on that issue, few saw the ECB officials concluding their inaugural
meeting in Frankfurt any the wiser, meaning the fate of nearly 14,000
tonnes of gold in euro-zone central banks' vaults remained up in the
air.
((Patrick Chalmers, London Newsroom +44 171 542 8057.
london.commodities.desk+reuters.com)) ($ - 0.902 European
Currency Unit ECUs)
Copyright 1998 Reuters Limited. |
