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

To: Bobby Yellin who wrote (33605)	5/10/1999 9:26:00 PM
From: goldsnow	Respond to of 116779

Gold Drops on Concern That Planned Sale by U.K. May Spark Others to Sell By Mark Deen Gold Drops on Concern U.K. Sale Plan May Spark Others (Update5) (Adds final prices, adds analyst comment in 3rd paragraph and details about government sales in 6th to 9th paragraphs.) New York, May 10 (Bloomberg) -- Gold fell close to a 20-year low, dropping more than 4 percent in two days, on speculation that U.K. plans to unload more than half its $6.5 billion in gold reserves will spark sales by other governments or central banks. The U.K. said Friday it will start auctioning 415 metric tons of gold in July, investing the proceeds in government bonds. Other nations may try to sell before then to avoid lower prices, analysts said. The U.K. will join Australia and Canada as countries that have shed gold to buy assets with better returns. ''Gold is doomed,'' and prices probably will fall further, said Tony Caen, senior metals trader at Credit Lyonnais Rouse USA Ltd. in New York. Gold for June delivery fell $5.30, or 1.9 percent, to $278.40 an ounce on the Comex division of the New York Mercantile Exchange, the lowest since April 5. Prices are down $12.30, or 4.3 percent, since Thursday. In August, prices fell to $271.60 an ounce, the lowest since 1979. In London, gold for immediate delivery fell $4, or 1.4 percent, to $278.75 an ounce in interbank trading. Spot gold is almost 8 percent cheaper than it was one year ago. The U.K. move to shed gold is the latest step by governments to wean themselves from a precious metal that's been the basis of the world's monetary system for most of the past two centuries and a unit of currency for much of human history. ''This is a bail out,'' said Dinsa Mehta, global head of commodity risks at Chase Manhattan Bank in New York. ''The auction process encourages a probe to the lowest possible price.'' Lots of Gold Central banks have accumulated the biggest stockpiles of gold, now totaling about 1.1 billion ounces or about a quarter of world stockpiles. The U.S. is the biggest holder, with 261.6 million ounces. Gold has become less important in monetary policy because the citizens can't walk into a bank and demand gold for their money. Many governments have begun to sell their gold in favor of assets with better returns. Gold, which fetched as much as $850 an ounce in 1980, has traded below $330 for most of the past two years. Prices fell 22 percent in 1997 after Australia and Argentina said they unloaded all of their holdings. Switzerland this year changed its constitution to allow gold sales, and the International Monetary Fund is considering selling some of its reserves. Other governments that have sold gold in recent years include India, the Czech Republic, Belgium, Luxembourg and the Netherlands. Not Selling To be sure, Bundesbank President Hans Tietmeyer said the Group of Ten central bank doesn't plan to step up sales as a result of the U.K. auctions. ''We have taken note of the U.K. Treasury announcement -- there has been no new decision to sell gold by other central banks,'' Tietmeyer said at a meeting of G-10 central bankers in Basel, Switzerland. ''We all agreed that gold will remain an important reserve asset for central banks.'' The Bundesbank is the world's second-largest gold holder after the U.S. Treasury. ''Tietmeyer is well known for his opposition to gold sales,'' said Frederic Panizzutti, head of research of MKS Finance SA, a Geneva-based metals refiner and trader. On Aug. 28, gold fell to what was then a 19-year low of $271.13 an ounce in London while the Comex gold futures contract fell to $271.60 an ounce. Those were the lowest prices since May 1979. ©1999 Bloomberg L.P. All rights reserved. Terms of Service, Privacy Policy and Trademarks.