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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: bob k who wrote (3300)	2/3/1999 12:55:00 PM
From: Stephen O	Respond to of 81068

Central Banks Should Sell Their Gold, Mining Analyst Says Cape Town, Feb. 3. (Bloomberg) -- Central banks should sell their gold reserves to reduce the practice of forward selling gold, a mining analyst said. Michael Coulson, head of global mining at Paribas in London, said central banks' lending of gold from reserves at low rates of interest has led to more forward sales, because producers could always borrow gold to meet forward commitments. That has helped lead to low gold prices, he said. ''The gold industry faces years of going nowhere unless it moves to neutralize central bank and other official gold holdings,'' said Coulson at the Fourth Investing in African Mining Conference in Cape Town. Coulson's views are in opposition to the views of most analysts, who say that central bank gold sales have contributed to lower prices in recent years. The specter of central bank sales helped push gold prices to their lowest in 19 years in August 1998. ''My knee-jerk reaction is that it would have downward pressure (on prices),'' said Nick Holland, financial director of Gold Fields Ltd., the world's third biggest gold producer, in Johannesburg. Central banks should be encouraged by the gold industry to sell their holdings, estimated along with those of the IMF, at 32,000 metric tons, in an orderly fashion, said Coulson. He suggested a 10-year program of sales that would reduce their holdings by 75 percent or alternatively the sale of IMF gold bonds backed by central bank gold. With such a gold available at low borrowing rates and thus no prospect of a shortage in the futures market, forward gold rates have tended to remain at or below the current gold price, capping any price rise in the metal, he said. Coulson argued that while gold production is rising, demand still outstrips supply and the market could absorb the gold sales and the gold price could even rise towards the end of the program in anticipation of a reduction in supply. Producers ''have become addicted to what, in effect, is an exercise in shooting themselves in the foot,'' Coulson said. Gold for immediate delivery fell as much as $3.10 an ounce to $286.25 an ounce in London interbank trade. Gold fell to its lowest in almost 19 years on Aug. 31, 1998 when it touched $271.13 an ounce. --Antony Sguazzin in Cape Town (27 82 452 3648) through the London newsroom/am/cs