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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Enigma who wrote (35463)	6/16/1999 8:36:00 PM
From: Alex	Respond to of 116764

Anglogold sees gold fall reaction overdone By MARIUS BOSCH London (Reuters) - Gold will recover from its recent 20-year low prices because the bullion market over-reacted to Britain's decision to sell more than half of its gold reserves, the world's largest gold producer, Anglogold, said on Tuesday. Anglogold's executive marketing director Kelvin Williams said in an interview that the UK Treasury's announcement on May 7 that it would sell 415 tons of the country's 715 tons of gold reserves, had distorted the market for gold. "The market has been given an unique opportunity in the Bank of England publically announcing gold sales in advance . . . to speculate against that action. "In a sense, the BOE sale in itself would be easily absorbed in this physical market. In the way they have announced it, they have introduced a distortion to the paper market and the result is that this huge speculative short against the gold price is a distortion and the market consequently is in a negative over-reaction," Williams said. Speaking as the global gold industry gathered in London for a Financial Times gold conference, Williams said the British sales had reintroduced fears of central bank sales of gold into the bullion market. "Two years ago, there were giant uncertainties as to what central bank from Europe will sell, how much metal would come out of Europe and it was assumed that central bank sales were just a linear and cumulative activity. "During the last 18 months, leading European central bankers have made clear this is not the case." Williams said the British sales announcement had caused the gold market to panic. "Even in parts of the market where you would have thought there would be a rather more intelligent or thoughtful perspective on what the Bank of England sale has meant, surprisingly we had the same reaction: 'Who is next?'," he said. "The market in a kind of popular frenzy continues to overreact to the Bank of England sale, that in part is a consequence of the method chosen. Because the BOE has pre-announced the sale and allowed all the speculators to sell off the price against it, it has made people a lot more nervous." But he said the gold price had to recover from current levels, which were the lowest in two decades. "It has to [recover]. You can have recovery, but do you recover from $260 to $290 or do you recover from $250 to $270. It is the question of the extent of the recovery. "It will turn in part on the effectiveness of the Bank of England auction method and it will turn in part on the extent of positive response from the mining industry and bullion bank sector to those auctions," Williams said. The first BOE auction of 25 tons of gold will take place on July 6. Referring to Anglogold's policy of hedging production forward, Williams said the South African gold miner was adequately protected. "We have got material price protection going out three years . . . We have the largest gold hedge position in the world, it is not the largest in percentage of production covered, it is the largest in the sense of volume. "We want some kind of financial security in order to meet financial targets in the two, three-year period and we are happy to be uncovered thereafter," he said. Turning to demand, Williams said it was still encouraging with a good start to the year but he said miners had to do more to stimulate demand. "But I think, gold producers have to stop taking demand for granted. Seventy percent of gold producers spent not one cent on the health of the market for their product, on [pushing for] deregulation of markets, removing taxations on gold and training of jewelry retailers," he said. woza.co.za