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

To: Bill Murphy who wrote (26292)	1/15/1999 7:58:00 PM
From: goldsnow	Read Replies (3) \| Respond to of 116764

Euro bullion blues If the dollar is in trouble, will gold or the euro be the better safe haven? Rodney Smith tries to answer the question. There's one group of people who have good reason to be anxious about the onset of the euro. International gold producers; the gold miners and the bullion traders. Most of the major European central banks hold substantial quantities of gold in their reserves. Bullion enthusiasts say this confirms that gold never was demonetised back in the 1970s. The fact that it is held by the major banks shows, they say, that even central bankers believe gold still has value as a currency. Other experts, like Gold Fields Mineral Services, which has just published a rather bearish outlook for the world gold market, think gold is trading more and more like a commodity. The new European Central Bank does not need all the gold and currency reserves held by the 11 member central banks which are joining the Euro. Officials have said it will hold just 15% of its reserves in gold. That will leave member banks, (governors of the European Central Bank) like those of Germany and France with large gold holdings, which they may decide to sell. Some countries - not all EU members - have already sold much of their gold recently: Canada, the Czech Republic, Australia and Belgium. And of course the gold market is overhung by the prospect of sales by the International Monetary Fund. But central banks are cautious and skilful market players. They are unlikely to offload large stocks of bullion at relatively depressed prices. At $286.75 after Christmas, an ounce of gold was barely $4 off its 18-year low of a year ago. Much will depend on how Europe's economies perform in the coming year. Economic downturn causes government spending to rise as demands on the instruments of the social security net increase. Government tax income falls. This makes them anxious to look for other ways of raising money. Time was when privatisation filled some of this gap - but the appeal of selling off the family gold could become unstoppable. But it's not all that bleak. There are very good reasons, too, why gold could have an excellent year. It is cheap, by any historic measurement. It also becomes attractive in extremis; people go for gold in times of trouble. The same is true of periods of increasing prosperity, especially in developing countries. India and China can be like large gold sponges. And after all, the demand for gold in fabrication - that is jewellery, dentistry and industrial uses - rose 14% last year to 3,750 tonnes -half again as much as the 2,400 tonnes mined during the same period. And, if the gold price remains around current levels for much longer, marginal mines will close, and the supply of new metal coming on to the market will shrink. The rest, as they say, is economics. Until and if the central banks decide to sell. news.bbc.co.uk