Gold Drops to 7-Month Low as Canada Backs Plan to Sell IMF Gold Reserves
Gold Drops as Canada Backs Sale of IMF Gold Reserves (Update5)
(Adds date of 19-year low in 4th paragraph.)
New York, March 26 (Bloomberg) -- Gold fell to a seven-month
low after Canada joined other Western countries in calling on the
International Monetary Fund to sell some of its gold to help
poorer nations pay debts.
The endorsement by Canada, the world's fourth-largest
producer, intensified speculation that central banks would follow
suit and dispose of their reserves. Gold prices have fallen by a
third since 1996 as national banks such as Australia and Belgium
sold the precious metal.
''It is not the IMF sales that concerns the market, it is
the precedent that it will set,'' said Leonard Kaplan, chief
bullion dealer at LFG Bullion Services in Chicago. IMF sales
could lead to ''a more organized program among major central
banks for sales of reserves,'' he said.
Gold for April delivery fell $3.40, or 1.2 percent, to
$279.70 an ounce on the Comex division of the New York Mercantile
Exchange, the lowest closing price since Aug. 31. Gold futures
reached a 19-year low of $271.60 on Aug. 28, 1998.
A total of 102,000 contracts changed hands, the exchange
said, three times the average daily volume during the previous 12
months.
In London interbank trading, gold for immediate delivery
fell $3.55, or 1.3 percent, to $279.75 an ounce.
Canadian Prime Minister Jean Chretien yesterday called on
the IMF to sell as much as 10 million ounces, or about 10
percent, of its gold reserves.
All the other Group of Seven nations, except Italy, have
made similar proposals. Still, an IMF gold sale could hurt
Canada's mining industry by depressing prices.
Specter of Gold Sales
''When the Australian government sold its reserves a few
years back, the Australian mining industry was up in arms,'' said
George Dlugosh, a vice president of precious metals at the Royal
Bank of Canada in Toronto. ''The politicians in Canada are not
looking at this aspect as they probably should. It doesn't show
much faith in one of their major industries.''
The specter of gold sales by central banks and institutions
such as the IMF, the world's second-largest holder of gold with
reserves of 103 million ounces, helped drop gold prices from a
high of more than $400 an ounce in February 1996.
Gold sales by Australia, the world's third-largest gold
producer, Belgium, Argentina and other nations in recent years
showed that the metal no longer is a key element of economic
policy.
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