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

To: Eashoa' M'sheekha who wrote (10276)	4/21/1998 2:47:00 AM
From: Alex	Read Replies (1) \| Respond to of 116815

Europe unlikely to sell more gold banker By William Mervin Gumede The new European central bank is unlikely to sell off gold, said the Bank of France's secretary-general, Didier Bruneel, in an interview in Paris with Independent Business. Individual European central banks are also unlikely to sell off their gold reserves. "The matter of gold is a highly sensitive political matter; nobody wants to sell," he said. "It is also a psychological matter, as gold for most still retains its inherent value." Bruneel said France was not planning to sell off its gold reserves and "that maintaining gold reserves is an important element for France". The rush by some central banks to sell bullion from their reserves has been blamed for hammering the price of gold to a two-decade low. Next month is crunch time for gold when the new European central bank announces how much gold it will keep to underpin the euro and the new European monetary system. Observers fear that if the bank decides not to hold gold reserves it will send a negative signal to the market that gold has no place in modern financial institutions. Such a move would send the price of gold plummeting. European central banks hold about 20 to 25 percent of their foreign reserves in bullion. Bruneel said it was unlikely Germany and Italy, the European Union's major holders, planned gold sales. France and Germany would be the two most important forces in the European Monetary Union. In many of the member countries, particularly Germany where the value of paper currency has been wiped out twice this century, gold has an almost mystical significance as the ultimate store of value during economic catastrophes. Bruneel said Belgium's central bank had sold gold because of a specific, exceptional problem. The bank wanted to reduce its debt to meet the requirements for entry into European monetary union. The proceeds of gold sales could help to reduce public-sector debts. That might be attractive to governments trying to reduce their debts to the 60 percent of gross domestic product that is laid down for participation in the single European currency by the Maastricht treaty. Belgium recently sold 299 tons of gold from its central bank reserves, more than half its holdings. Bruneel said the general thinking among European bankers was contrary to the ideas that motivated the Belgians. The Netherlands has also recently sold gold. Outside Europe, Australia, Canada and Argentina have been other significant sellers. The Belgians and the Dutch said they were holding too much of their reserves in gold instead of foreign exchange. A quarter of a century has passed since gold played an official anchoring role in the international monetary system. Though its formal link with most paper currencies has long been severed, central banks still exert a powerful influence on gold. At the yearly gathering of the World Economic Forum in the Swiss village of Davos early this year, Deputy President Thabo Mbeki urged central bankers to be more transparent and responsible with their gold sales. Mbeki and the captains of South Africa's gold-mining industry had discussions on the future of gold reserves with bankers and businessmen. Criticism of the secrecy with which central banks deal in gold dominated the talks. Mbeki said: "The banks' gold activities are shrouded in thick mist [and] speculators can put stories into the market which are taken as reality because there are no statements by the banks to clarify the situation." All Material c copyright Independent Newspapers 1998.