Central bank gold threat
overdone -Paribas analyst
09:14 a.m. May 11, 1999 Eastern
By Anshuman Daga
BOMBAY, May 11 (Reuters) -
The bullion market should set aside
fears that other major central banks
will follow Britain's surprise
decision to sell over half its gold
reserves, a senior mining analyst
said on Tuesday.
''The British are bad sellers of gold
and they have got their timing
wrong,'' said Michael Coulson,
head of global mining research for
Paribas.
''The big boys are not influenced
by what the United Kingdom
does,'' Coulson told Reuters in an
interview.
Friday's announcement by Britain
prompted a round of statements by
other governments, including the
United States and Italy, that no
sales of their gold reserves were
imminent.
Only last month Switzerland voted
to go off the gold standard, opening
the door to the eventual sale of up
to half of the country's 2,600 tonnes
of gold reserves.
Gold prices had been showing signs
of recovery after bearish pressure
from planned IMF and Swiss
central bank sales. But the price has
tumbled by about $15 since the
British news.
''The most likely reason the Brits
sold is euro requirements. The
European Central Bank has a gold
element in its reserves,'' Coulson
said during a business visit to India.
The U.K. Treasury said it would
cut its gold reserves to 300 tonnes
from 715 tonnes, starting with a
series of auctions to sell 125 tonnes
during 1999/2000. The Bank of
England will replace the gold in its
reserves with the euro, dollar and
yen.
Spot gold on Tuesday was quoted
at $278.50/$278.90 per ounce
after closing at a life-of-contract
low on the active COMEX
instrument and challenging key
support at $277 on a spot basis.
Coulson stuck by Paribas's bullish
outlook for gold, saying the market
should overcome the present spell
of bad news and reap substantial
gains in the medium term.
''We have got our neck very firmly
on the block. I think that we could
still see some significant upside.''
''At current levels, there is
substantial demand for gold and
one of the important factors is the
improvement in economic outlook
in the Far East.''
''This means that last year's selling
of gold by individual citizens in
Thailand and South Korea is now
complete.''
Coulson listed gold demand from
India, where rural demand had
been boosted by good harvests,
and the upward potential for
consumption in China among the
key pillars of support for the
battered metal.
India's love of gold appeared to be
enduring beyond the rural sector, he
said.
''Even in the upper and middle
classes where there is sophistication
in financial dealing and people are
perfectly happy to hold stocks,
bonds and real esate, there does
not seem to be any evidence that
the cultural link with gold has been
broken.''
''I see Indian consumption rising
while the price remains low,''
Coulson said.
India is the world's largest gold
consumer and spent more importing
the metal than it did on oil imports
last year. Its offical imports in
calendar 1998 were 614 tonnes
worth $5.8 billion, according to
World Gold Council data, but
unofficial imports would add
another 10 percent to the bill.
Copyright 1999 Reuters Limited. |
