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

To: Alex who wrote (39799)	8/31/1999 11:36:00 AM
From: goldsnow	Read Replies (1) \| Respond to of 116812

Australia central bank profits from '97 gold sales 03:48 a.m. Aug 31, 1999 Eastern By James Regan SYDNEY, Aug 31 (Reuters) - The Reserve Bank of Australia appears to have made the right decision two years ago when it sold two-thirds of gold holdings and used the proceeds to buy foreign currencies, the RBA's annual report shows. Since the RBA's decision to sell 167 tonnes of gold between January and June 1997 in favour of U.S. dollars, German marks and Japanese yen, the price of bullion has fallen by 21 percent. Meanwhile, the cumulative effect of the sales and the reinvestment of proceeds has been to increase the RBA's income by A$795 million (US$506 million), the RBA said in its 1998/99 (July-June) annual report, released on Tuesday. Gold prices plummeted after the announcement was made on July 4, 1997 and the RBA was widely criticised for disregarding the fortunes of the Australian gold industry, the world's third largest. One of Australia's biggest mining magnates, Joseph Gutnick, demanded the government buy back the metal. Within a week, A$1.6 billion was wiped off the value of the Australian gold mining sector, slashing expansion and exploration budgets for many of the country's mining companies. The RBA ignored the industry's cries and bullion prices never really recovered and now wallow below US$260 an ounce, the lowest in 20 years, compared with around US$330 two years ago. ''They certainly did well in selling gold at a higher price but it also hurt the market,'' said gold analyst Keith Goode of Bell Securities Ltd in Sydney. But just how much damage did the Australian sales do to the world bullion market? The biggest concern among gold bugs has been that other central banks would follow Australia and dump their own bullion reserves and to some degree this has occurred. While most sales are done covertly in order to minimise any disruption to the market, national banks are becoming more open about what they think about gold. Britain did the once-unthinkable when it announced on May 7 it would hold a series of auctions over 33 months to unload 415 tonnes of its bullion -- more than half its total reserves -- and disclose the prices paid. The gold price fell by 10 percent on the news as investors feared that other central banks and so-called ''official'' holders of gold would race to get rid of their own bullion and take prices to even lower depths. There are no figures beyond April but official holdings decreased by 900,000 ounces to 1,080 million ounces between February and April according to the International Monetary Fund. Analysts expect that figure to be higher between May and July. The UK had not previously been considered a potential seller, noted the World Gold Council. ''It was this combination of factors that sent such a strongly negative message to the market,'' the council said in its August report on gold trends. The RBA said that most of its remaining 80 tonnes of gold is on loan, but even here the precious metal is underperforming. ''This returned about A$18 million over the year (1998/99) compared with A$21 million in the previous year,'' the RBA said. Still, gold on loan from central banks is estimated to have broadly doubled over the past five years to more than 4,500 tonnes, the RBA said. This is equivalent to about one-and-a-half years of annual world production. (A$1 - US$0.6370) ((Sydney newsroom 61-2 9373-1814, jim.regan+reuters.com)) Copyright 1999 Reuters Limited. All rights reserved.