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To: Zardoz who wrote (38683)	8/9/1999 5:50:00 PM
From: lorne	Respond to of 116760

Hi Hutch. >>> " IMF could issue a gold backed bond with and SDR carry rate exchange. Which would make it more liquid then Gold, and more desirable then Dollars." <<< Could you explain why gold backed bonds would be more desirable than dollars.......Thanks Take care Lorne

To: Zardoz who wrote (38683)	8/9/1999 10:42:00 PM
From: lorne	Read Replies (1) \| Respond to of 116760

Hi Hutch. Others think as you do about gold backed bonds :o) Warburg Dillon to provide gold financial product to local banks (Tuesday, August 10, 1999) Salil J Panchal in Mumbai For the first time in the Indian bullion markets, investment bank Warburg Dillon Read is ready with a gold financial product which would insulate investors against a continuing decline in gold prices while retaining the upside benefits of a high yield on the bond. The key features include a 6-7 per cent return per annum and an overall gain of between 50-60 per cent over a five year period, which would form the holding period for the instrument. The derivative instrument would be indexed to the international gold price either at the London or New York markets. Finer details, including the benchmark gold price (below which price protection would be guaranteed to the investor), will be worked on after the RBI finalises the rules and regulations for gold bond schemes in India. Warburg will move into a tie-up with a domestic bank through which the product would be marketed. ''The product ensures that there is a zero downside while retaining a 100 per cent upside if gold prices move up,'' Howard Knight, executive director (precious metals) Wraburg Dillon Read said. The product gains significance considering that international gold prices have dipped from $ 288.2 on May 7, 1999 to $ 256 during intra-day trading yesterday at London, thereby registering a fall of 11.1 per cent in the last quarter. Leading analysts and bullion dealers say that international gold prices will remain depressed in coming months in the backdrop of further sales from leading European central banks and/or IMF. Warburg, which is the largest provider of precious metals option products to the market, is one of the largest suppliers of gold into India and has the largest private depository of central bank gold. According to Knight, the bond may become an exchange tradable instrument thereby ensuring liquidity at the secondary markets, though this would depend on the RBI regulations put out. Various assumptions relating to interest rates, forward rates of gold will be taken into consideration while looking at what returns the instrument would provide over a five year period. The bond scheme would mobilise gold and this would be sent for assaying offshore so that international refining standards are maintained. Warburg has one of the largest in-house gold refinery in Switzerland, with the assayers being sworn-in with the Swiss government. The gold after refining would be brought back into India. Knight argued that international refining was vital to maintain quality assurance through one year testing and a similar period for the product. Gold appears trapped in the range of $ 270-300 per ounce range, the recent Warburg Dillon Read precious metals report says. The report has however said that the forecast would be reduced to take into account current bearish trends. business-standard.com