Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Alex who wrote (33625)	5/11/1999 12:32:00 AM
From: hunchback	Read Replies (1) \| Respond to of 116790

World Gold Council Chief Executive Reflects on British Treasury Gold Sales Business Addressing the Bank Credit Analysts Conference in London today, Haruko Fukuda, Chief Executive of the World Gold Council commented upon the decision by the British Treasury that it will be selling more than half of its gold reserves. The following is a summary of Miss Fukuda's remarks: "Gold is at once a commodity and a universal currency. Is the British Chancellor of the Exchequer challenging that long-held assumption by bringing the gold ratio down to a mere 7% of the UK's total official reserves? Or was there another hidden political agenda? We at the World Gold Council have been told by HM Treasury that it was emphatically a political decision. I am delighted to have this opportunity to refer to the subject of gold, not least because I have recently been appointed Chief Executive of the World Gold Council, which represents the interests of the world's gold mining companies. "I did not have it in mind to discuss gold today, but if you would forgive me, I should like to give a very brief advertisement for gold as a reserve asset in defiance of the latest decision of the Chancellor of the Exchequer. "Despite persistent efforts by the United States to drive gold out of the international monetary system entirely, gold is today an important part of the world's central banks' official reserves. Indeed, overall, the amount of gold held by central banks has not in fact fallen since 1970; that is, before gold ceased to have a role in defining the value of currencies. 70% of countries reporting to the IMF declare gold holdings and only 6% declare they have no gold. "Central banks hold gold partly at least because it is no one else's liability; it is not subject to the vagaries of economic management. We should remember why gold became de-coupled from the dollar and why the subsequent attempt to replace it with another international reserve asset, SDRs, was a failure. It is too early to tell whether the experience of the recent past, with moves to create independent central banks with price stabilization goals, will work in perpetuity. But there is no escaping the fact that the value of currencies depends on governments' promises. "Gold has a long history of maintaining its real value over the long term: a calculation of average total annual returns for a dollar investor from buying in any given year and selling in any subsequent year (randomly chosen) during the hundred years between 1896 and 1996 demonstrates that gold has out-performed both long and short dated US government bonds. A nation's reserves should be diversified to minimize risk: research shows that gold is an ideal portfolio diversifier since returns are negatively correlated with most other reserve assets. The European Central Bank's research a year or so ago suggested that a reserve portfolio containing up to 20% of gold is subject to less risk than one entirely composed of US dollars and Japanese yen. "Gold reserves build public confidence: perhaps it is not totally a coincidence that the currencies of Australia and Canada devalued substantially following their sales of gold. Opinion polls taken last year in Europe showed overwhelming support for countries maintaining gold reserves. "Gold is generally regarded as the asset of last resort as governments have only drawn on their gold reserves in times dramatic economic or social difficulties. The last sale of gold in France was in 1969 to deal with the financial consequences of the May 1968 uprising; in Portugal, where gold was sold following the 1975 revolution; more recently, India used its gold reserves to borrow US$1 billion to avoid default in 1991; and in the recent financial crisis in Korea gold was dis-hoarded to help the national economy. "Gold reserves of central banks are still perceived as an insurance against major disturbances in the international monetary system. The last sharp rise in the price of gold in the early 1980s coincided with the fears of a collapse of the banking system as a result of the Latin American debt crisis. "Lastly, but most importantly, gold reserves are an emblem of monetary sovereignty. Why else would the ECB choose a 15% gold ratio for its reserves in launching the new currency, the Euro? When the Baltic states regained their independence in 1990, one of the first acts was to ask for the restitution of their gold that had been deposited in European central banks. Revealingly, Toyoo Gyohten, perhaps the best-known international negotiator from Japan, wrote in his book, which was co-authored by Paul Volcker, that 'there were rather strong arguments among politicians and even among officials for increasing our gold reserves, because it was obvious that unless you had some gold in your reserves you really could not participate in international discussions because no one would pay any attention to you.'" The World Gold Council is an international organization formed and funded by leading gold mining companies from around the world to increase the demand for gold. marketwatch.newsalert.com